• Samsung and SK Hynix shares dropped significantly after the US revoked permits for chip manufacturing in China.
• U.S. restrictions affect a large portion of South Korean chipmakers' operations, with China being crucial for their production.
• Analysts predict limited short-term impacts, as both companies have planned new production primarily in South Korea.

Shares in Samsung Electronics and SK Hynix dropped on Monday following the announcement that Washington revoked authorizations for these companies to secure U.S. semiconductor manufacturing equipment necessary for their operations in China. The move comes as the U.S. government seeks to tighten its grip on technology exports to China, with the new regulations to take effect in 120 days, according to Reuters.

These South Korean chipmakers significantly dominate the global memory chip market, holding approximately 70% of the DRAM market and 54% of the NAND market. On the stock exchange, shares of SK Hynix fell by 5%, while Samsung's shares decreased by 2.6%, according to The Jakarta Post and Reuters.

Analysts suggest that while the U.S. sanctions pose a challenge, they are not likely to disrupt Samsung and SK Hynix's long-term plans significantly. Ryu Young-ho, a senior analyst at NH Investment & Securities, indicated that the companies had already made arrangements for their production lines primarily in South Korea and had plans for continued operations in China. This assessment is supported by both Reuters and South China Morning Post.

In light of the weakened authorization regime, both Samsung and SK Hynix have committed to maintaining communication with the South Korean and U.S. governments to mitigate any adverse effects on their business operations. This strategy reinforces their intention to remain resilient in the rapidly evolving semiconductor landscape. Analysts further predict a potential shift towards collaboration with Chinese equipment manufacturers if U.S. machinery is not secured in time, as highlighted by The Jakarta Post and Reuters.

The decision by the U.S. government emerged following discussions on tariffs between President Trump and South Korean President Lee Jae-myung, and it raises concerns over the broader implications for global supply chains. Notably, the memory plants in China owned by international firms remain crucial for the global chip supply, accounting for substantial percentages of overall memory output, according to South China Morning Post.