Samsung Electronics and SK Hynix are upgrading their China factories to produce more advanced memory chips, four people familiar with the plans said, aiming to fend off competition from a fast-growing Chinese rival and meet huge AI demand.

How much to invest in their Chinese operations has become a tricky question for the South Korean semiconductor giants ever since the US began imposing export controls on some chip-making equipment in 2022 amid an effort to slow China’s technological progress.

Both companies are now required to seek US licenses annually if they want to install US-made equipment such as etching machines in China. The US Commerce Department’s Bureau of Industry and Security also said in 2025 it did not intend to grant licenses to upgrade technology and expand capacity at the foreign chipmakers’ factories in China.

The regulatory headaches have limited their ability to refit their factories and contributed to loss of market share to Yangtze Memory Technologies Co (YMTC). Executives at the South Korean chipmakers have publicly warned that geopolitical tensions are undermining their Chinese operations.

Samsung and SK Hynix confirmed in statements to Reuters that upgrades were underway and were being done in close consultation with Washington, but did not disclose details of production plans that are being reported here for the first time.

Reuters could not, however, determine to what extent US authorities have granted export licences for equipment that Samsung and SK Hynix need for their planned upgrades.

According to the people, the two companies are working to manufacture flash NAND memory chips with more than 200 layers at their Chinese plants, which would bring them in line with what is being produced in South Korea.

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