Samsung, SK Hynix Upgrade China Chip Factories as YMTC Gains NAND Market Share

Samsung Electronics and SK Hynix are upgrading their Chinese manufacturing facilities to produce more advanced memory chips, seeking to defend their market positions against a rapidly advancing domestic rival while capitalizing on surging demand from artificial intelligence infrastructure.

The upgrades mark a difficult balancing act for the South Korean semiconductor manufacturers. Both companies need to modernize their Chinese operations to remain competitive, but US export restrictions have made it harder to deploy advanced chipmaking equipment and expand production in the country. Their efforts also come as Chinese memory maker Yangtze Memory Technologies Co (YMTC) gains ground in its domestic market.

Four people familiar with the plans told Reuters that Samsung and SK Hynix are working to manufacture NAND flash memory chips with more than 200 layers at their Chinese factories, bringing those facilities closer to the technology levels used in South Korea.

The companies confirmed that upgrades were underway but did not disclose specific production targets. Samsung said its work complied with US export regulations and was intended to meet growing demand from global customers, including those in the United States.

The extent to which Washington has approved the equipment needed for the upgrades remains unclear.

Since 2022, US restrictions on advanced semiconductor manufacturing equipment have complicated investment decisions for foreign chipmakers operating in China. The measures form part of Washington's broader effort to limit Beijing's access to technologies that could strengthen its semiconductor capabilities.

Samsung and SK Hynix must obtain annual US licenses to install certain American-made equipment, including etching machines, at their Chinese facilities. In 2025, the US Commerce Department's Bureau of Industry and Security said it did not intend to approve licenses for technology upgrades or capacity expansion at the companies' existing Chinese factories.

The restrictions have constrained the manufacturers' ability to modernize their facilities, creating an opening for YMTC to improve its competitive position. Executives at both South Korean companies have also warned publicly that geopolitical tensions are undermining their Chinese operations.

The Bureau of Industry and Security did not directly address Reuters' questions about the status of approvals for the latest upgrades. It referred the news agency to its 2025 statement indicating that licenses would be granted for the companies to continue operating their existing Chinese factories, but not to expand capacity or upgrade technology.

That situation creates a significant challenge for Samsung and SK Hynix. Advanced memory production requires continual process improvements, and restrictions on equipment access can make it harder to maintain manufacturing competitiveness even when companies are not building new factories.

Now, the concern for the South Korean manufacturers is not just about how much to invest in China, but how to preserve the value of existing facilities without violating US restrictions or falling behind competitors that can develop and deploy technology with fewer external constraints.

Samsung Targets 286-Layer NAND Production

Samsung's facility in Xian, northwestern China, accounts for approximately 40% of the company's global NAND output. The plant currently produces chips with around 200 layers, according to two people familiar with the plans.

Under an internal project known as "Monami", Samsung is converting the facility to manufacture its 286-layer V9 NAND chips. One person familiar with the project said the company is targeting monthly output of 5,000 wafers in December 2026, before increasing production to 40,000 wafers by December 2027.

The planned increase would represent a substantial rise in output of the more advanced chips, although Samsung has not publicly confirmed those production targets. The company said the upgrade was intended to serve growing demand from international customers, including US buyers. It added that it was not expanding production capacity or constructing new manufacturing facilities.

NAND flash memory retains data even when power is switched off and is widely used in smartphones, personal computers, and solid-state drives. Its role in AI infrastructure is also important, as data centers require substantial storage capacity to manage the information used by AI models and other computing workloads.

Increasing the number of layers in a NAND chip allows manufacturers to store more data within a given footprint and potentially reduce the cost per unit of storage. As demand for data-center infrastructure grows, the ability to manufacture higher-density memory becomes increasingly important to suppliers competing on performance and cost.

SK Hynix is pursuing a similar upgrade at its Dalian facilities in northeastern China, where it plans to switch from 192-layer NAND products to chips with at least 240 layers, according to three people familiar with the matter.

The Dalian site came under SK Hynix's control through its acquisition of Intel's NAND operations in 2021. It remains the sole NAND manufacturing facility for that business, now known as Solidigm, which is preparing for a US initial public offering.

One person said SK Hynix is authorized to manufacture chips with up to 240 layers at Dalian and may seek US permission to conduct research and development on products with more than 300 layers. Such work could help the company prepare for potential production in the United States.

SK Hynix is also discussing plans with the Trump administration to build a new NAND factory in the country, according to the report.

The potential research programme reveals how manufacturers are attempting to separate the immediate needs of their Chinese operations from longer-term investment plans in markets where access to advanced equipment may be less restricted.

YMTC Gains Ground As Memory Competition Intensifies

The urgency behind the upgrades is evident in the latest market-share figures. YMTC controlled 38.5% of China's NAND market in the second quarter, up from 28% for the whole of 2025, according to research firm Omdia.

Samsung's share fell to 33.5% from 36%, while SK Hynix's declined to 17% from 20%.

The figures indicate that the South Korean companies are facing growing competitive pressure in a market where they have historically held strong positions. YMTC is gaining significantly because China remains a major market for electronics and data-storage products, while domestic semiconductor development has become a priority for Beijing.

YMTC's current product range consists mainly of 160-layer and 232-layer NAND chips. However, two people familiar with its operations said the company also produces a small volume of 294-layer chips and plans to manufacture products with more than 300 layers. That development raises the stakes for Samsung and SK Hynix. Both companies already sell more advanced NAND products outside China, but their Chinese factories face tighter constraints on how quickly they can adopt the latest manufacturing processes.

Samsung sells NAND chips with up to 286 layers outside China and unveiled a prototype with more than 400 layers in August. SK Hynix sells products with up to 321 layers.

The gap between the technology available at their Chinese facilities and their broader product portfolios explains the potential cost of operating under different regulatory conditions across markets. Even if the companies can maintain their existing Chinese output, restrictions that delay upgrades could weaken their ability to compete with local suppliers over time.

At the same time, the surge in AI-related demand gives both manufacturers an incentive to improve production efficiency and deliver higher-density storage. The challenge is to meet that demand while navigating Washington's restrictions and deciding how much future manufacturing capacity should be concentrated in China or redirected elsewhere.