Rumor has it that Samsung and SK Hynix (SKHY.US) are seeking to upgrade Chinese factories: if they want to grab AI orders, they also need to prevent Yangtze River Storage from grabbing shares

The Zhitong Finance App learned that, according to four people familiar with the matter, Samsung Electronics and SK Hynix (SKHY.US) are upgrading their production lines at their Chinese factory to produce more advanced memory chips, with the aim of resisting competition from rapidly growing Chinese competitors and meeting huge demand for artificial intelligence (AI).

Since the US began implementing export controls on some chip manufacturing equipment in 2022, the scale of investment in the Chinese business of these two South Korean semiconductor giants has become a difficult issue they have faced.

Today, if these two companies want to install equipment made in the US such as etching machines in China, they must apply for US permission every year. The US Department of Commerce's Bureau of Industry and Security also stated in 2025 that it does not plan to issue licenses to upgrade technology and expand production capacity at these foreign chipmakers' factories in China.

Regulatory concerns limited their ability to remodel the factory and caused their market share to be encroached upon by Yangtze River Storage (YMTC). Executives from the two South Korean chipmakers have publicly warned that geopolitical tensions are hurting their Chinese operations.

Samsung and SK Hynix confirmed in a statement that the upgrade is ongoing and is being carried out in close consultation with the US, but details of the production plan were not disclosed. It is also currently uncertain to what extent the US authorities have issued export licenses for the equipment needed to upgrade Samsung and SK Hynix plans.

According to people familiar with the matter, the two companies are working to manufacture more than 200 layers of flash memory NAND chips at the Chinese factory to level the level of production line technology in Korea.

NAND flash memory is a storage chip that can retain data when power is lost. It is widely used in smartphones, PCs, and AI data center solid-state drives; the higher the number of layers stacked on a single chip, the higher the storage density, and the lower the unit storage cost.

Samsung targets 286-layer chips

According to two people familiar with the matter, Samsung's factory in Xi'an in northwestern China accounts for about 40% of the company's global NAND production, and currently produces about 200-layer chips.

One of the people familiar with the matter said that as part of a project internally codenamed “Monami,” Samsung is transforming the factory to produce 286-layer V9 NAND chips. The goal is to produce 5,000 wafers per month in December this year, then increase to 40,000 wafers by December 2027.

Samsung said the upgrade complies with US export regulations, adding: “This upgrade is aimed at meeting the growing needs of global customers, including US customers. The company is not expanding production capacity or building new manufacturing facilities.”

Three people familiar with the matter said SK Hynix is seeking to convert 240 floors and above of NAND products at its factory in Dalian, Northeast China.

According to a person familiar with the matter, the company currently produces 192-layer products in Dalian.

When SK Hynix acquired the Intel (INTC.US) NAND business in 2021, it acquired the Dalian plant, which is still the only NAND chip manufacturing base for this business. The business is currently called Solidigm and is preparing to go to the US for an initial public offering.

One of the people familiar with the matter said that the company has been approved to produce chips with up to 240 layers in Dalian and may seek permission from the US to develop more than 300 layer chips in Dalian, which will help lay the foundation for potential production in the US. The company is in discussions with the Trump administration on plans to build a new NAND factory in the US.

The US Department of Commerce's Bureau of Industry and Security did not directly respond to questions about the approval status of Korean chipmakers. This section only reaffirms its 2025 statement that it intends to issue license applications for these companies to operate their existing factories in China, but will not approve capacity expansion or technology upgrades.

Changjiang Storage continues to catch up

At a time when Samsung and SK Hynix are struggling with how much to invest in Chinese factories, Changjiang Storage is developing rapidly.

According to data from research firm Omdia, Changjiang Storage occupied 38.5% of China's NAND market share in the second quarter of this year, up from 28% in 2025, and surpassed Samsung. In contrast, Samsung's share has declined from 36% to 33.5%, while SK Hynix's share has dropped from 20% to 17%.

According to two other people familiar with the matter, Changjiang Storage's product line is mainly 160-layer and 232-layer NAND chips, but it also produces a small number of 294-layer chips and plans to manufacture products with more than 300 layers.

Changjiang Storage did not respond to requests for comment.

Outside of China, Samsung sells NAND chips with up to 286 layers, and released a prototype NAND chip with more than 400 layers in August of this year. SK Hynix sells NAND chips with up to 321 layers.