Samsung and SK hynix are injecting fresh capital into their legacy manufacturing facilities in China even as U.S. export controls tighten.

Despite Washington’s multilayered semiconductor restrictions on Beijing—originating with Biden-era export curbs in 2022—the strategic importance of Samsung Electronics’ and SK hynix’s Chinese chip factories has only grown. Amid an AI-driven memory boom, even relatively older-generation memory chips manufactured in China are experiencing strong demand and healthy profit margins. Consequently, both Korean giants have increased capacity and investment in their Chinese operations since 2025, expanding NAND production and keeping China’s share of their overall memory output broadly consistent with pre-restriction levels.

“China’s share of our production has remained largely unchanged, and we have no plans to scale back our operations there,” a senior SK hynix executive told the Korea JoongAng Daily. The facilities remain critical to global supply: Samsung’s Xi’an plant accounts for 40 percent of the company’s total NAND flash production. For SK hynix, its Wuxi factory handles 40 percent of total DRAM output, while its Dalian plant manages 30 percent of total NAND production.

Capital commitments reflect this strategic priority. In 2025, Samsung’s equity investment in its Xi’an facility surged 68 percent year-over-year to 465.4 billion won ($334 million), earmarked for production-line upgrades following a multi-year pause between 2020 and 2023. SK hynix’s spending is even more substantial, exceeding 1 trillion won across its Wuxi DRAM and Dalian NAND plants. At Wuxi, investment reached 581 billion won—a 102 percent jump from 287.3 billion won in 2024—while Dalian received 440.6 billion won, marking a 52 percent increase.

While the companies are accelerating domestic chip construction in South Korea to meet surging demand, a significant supply surge will not materialize immediately. During a July conference call, Samsung projected that meaningful increases in wafer capacity would not arrive before 2028, an outlook echoed by multiple analysts. Meanwhile, their China operations—though restricted to conventional memory processes—have become just as strategically vital as their high-bandwidth memory (HBM) lines. Prices for legacy DRAM and NAND have actually climbed more steeply than HBM prices, prompting some manufacturers to shift Korean production lines back toward conventional DRAM to capture higher profitability.

Expansion continues on the ground. Reports indicate that SK hynix’s second Dalian factory, with equipment arriving this year, will begin production next year. The new line will add 40,000 to 60,000 wafers per month, increasing the site’s overall capacity by 50 percent. “As demand for enterprise solid-state drives surges due to rapid AI data center expansion, NAND flash supply has to keep up, which is why the company is moving quickly to ramp up supply there,” a source familiar with the matter stated.

This ramp-up occurs against a backdrop of tightening U.S. export controls. The U.S. Department of Commerce previously granted Samsung and SK hynix’s Chinese facilities validated end-user (VEU) status, permitting license-free imports of certain controlled American chip equipment. However, Washington revoked that status in 2025, forcing Korean manufacturers to secure annual licenses for related machinery. Their Chinese plants remain heavily dependent on etching tools from U.S. suppliers including Applied Materials and Lam Research. To navigate these restrictions without triggering a U.S. export ban, Samsung and SK hynix reportedly spent two years testing domestically produced Chinese tools for use in their Chinese operations, according to Reuters. Because these facilities run legacy processes rather than precision HBM manufacturing, the equipment does not require the same extreme tolerances.

Such adoption would represent a major milestone for Chinese toolmakers, potentially advancing China’s push toward technological self-sufficiency. Both Samsung and SK hynix, however, denied the Reuters report, maintaining that they have not conducted any testing that violates U.S. regulations.