As the United States continues to escalate export controls on China’s semiconductor industry, a policy designed to curb Beijing’s chip ambitions is unexpectedly opening a window for Chinese equipment makers. According to a Reuters report citing multiple sources familiar with the matter, South Korean memory giants Samsung Electronics (005930.KS) and SK Hynix (000660.KS) are secretly evaluating etching equipment from China’s Advanced Micro-Fabrication Equipment (AMEC) as a backup plan in response to potentially tighter US restrictions in the future.

Sources revealed that the two South Korean semiconductor titans began testing AMEC’s etching equipment approximately two years ago. At the time, there was significant uncertainty over whether the US would continue to allow South Korean firms to ship American-made semiconductor equipment to their Chinese facilities. While these evaluations have not yet evolved into large-scale adoption decisions, gaining recognition from the world’s top memory manufacturers would be a highly significant commercial endorsement for Shanghai-headquartered AMEC, underscoring the paradoxical effects of US technology control policies.

In response to the rumors, Samsung Electronics explicitly denied the matter in a statement to Reuters, saying it has never tested AMEC equipment for the purpose of importing it into its Chinese factories and has never considered doing so. SK Hynix declined to comment. AMEC and the US Department of Commerce’s Bureau of Industry and Security (BIS), which enforces export controls, did not immediately respond to requests for comment.

Supply Chain Anxiety Amid Tightening Controls

Samsung and SK Hynix operate massive memory production hubs in China. Samsung has a NAND flash memory factory in Xi’an, while SK Hynix operates a NAND plant in Dalian and a DRAM plant in Wuxi. These production lines currently rely heavily on etching equipment provided by US giants like Applied Materials (AMAT) and Lam Research (LRCX).

In 2023, the US Commerce Department designated the two companies’ Chinese factories as “Validated End Users” (VEU), allowing them to import certain controlled US equipment without applying for case-by-case permits. However, Washington revoked this status in 2025, subsequently issuing one-year licenses allowing both companies to bring chipmaking equipment into their Chinese factories through 2026.

Sources indicated that even with the annual licenses secured, both companies remain deeply concerned that future US restrictions might not only target the import of new equipment but could also extend to the repair, maintenance, and parts replacement of existing Western equipment. With this anticipation, the South Korean firms began viewing Chinese equipment makers as a “spare tire” for maintaining and upgrading their existing production lines in China, rather than using them to expand capacity there.

An Unexpected Opportunity for China’s Equipment Industry

This testing initiative provides a rare breakthrough for China’s emerging semiconductor equipment industry. While Chinese manufacturers still lag behind overseas competitors in advanced lithography and certain inspection equipment, the technology gap has narrowed significantly in areas like etching, thin-film deposition, cleaning, and chemical mechanical polishing (CMP), with highly competitive pricing.

Dan Hutcheson, Vice Chair of research firm TechInsights, analyzed that Chinese chip equipment is generally 20% to 30% cheaper than comparable foreign products. Sources also mentioned that AMEC’s equipment is already adopted by major Chinese chipmakers, including NAND flash memory manufacturer Yangtze Memory Technologies Co. (YMTC), giving Samsung and SK Hynix greater confidence that some tools are mature enough for testing.

If Chinese equipment makers like AMEC successfully penetrate the supply chains of major South Korean firms, they could, in the long term, pose a challenge to companies that have long dominated the wafer fabrication equipment market, including Applied Materials, Lam Research, KLA (KLAC), and manufacturers from Japan and Europe. China remains a crucial market for these international giants; for instance, Applied Materials reported revenue of $8.53 billion (approximately NT$275 billion) from China in its fiscal year 2025, accounting for 30% of its total revenue.

A report from Deutsche Bank estimates that the market share of Chinese equipment makers could increase significantly this year. The bank estimates that four companies—Naura Technology Group, AMEC, Piotech, and ACM Research—will each surpass $1 billion (approximately NT$32 billion) in revenue in 2026.

According to Deutsche Bank’s forecast, these four companies could collectively capture 25% to 30% of China’s roughly $28 billion (approximately NT$903 billion) wafer fabrication equipment market this year. Excluding lithography and metrology tools, the market share of Chinese suppliers could even approach 40%.

Despite the seemingly optimistic outlook, Chinese equipment makers still face numerous challenges to achieving a full breakthrough, including lengthy equipment qualification processes, smaller after-sales service networks, intellectual property concerns, and potential political pressure from Washington. Furthermore, it remains unclear whether Samsung and SK Hynix would import Chinese equipment into their home factories in South Korea due to information security and IP risks. What is certain, however, is that US export controls have objectively created an unprecedented development opportunity for China’s semiconductor equipment industry.