It is reported that Samsung and SK Hynix (SKHY.US) are seeking to upgrade their factories in China: aiming to win AI orders and prevent Yangtze Memory from taking market share.

According to sources cited by Zhitong Finance APP, Samsung Electronics and SK Hynix (SKHY.US) are upgrading production lines at their factories in China to manufacture more advanced memory chips. This move aims to withstand competition from rapidly growing Chinese rivals and address the surging demand for artificial intelligence (AI).

Since the United States began imposing export controls on certain chip manufacturing equipment in 2022, the scale of investment in China operations by these two Korean semiconductor giants has become a thorny issue for them.

Now, if these companies wish to install U.S.-made equipment such as etching machines in China, they must apply for U.S. licenses every year. The U.S. Department of Commerce’s Bureau of Industry and Security also stated in 2025 that it does not intend to grant licenses for technology upgrades or capacity expansions for these foreign chipmakers' Chinese plants.

Regulatory challenges have limited their ability to upgrade factories and allowed their market share to be eroded by Yangtze Memory Technologies (YMTC). Executives from the two Korean chipmakers have publicly warned that geopolitical tensions are exacting a toll on their China business.

Samsung and SK Hynix have confirmed in a statement that upgrades are underway, carried out in close coordination with the U.S., but did not disclose production plan details. It is also unclear how many export licenses U.S. authorities have issued for the equipment needed for Samsung and SK Hynix’s upgrade plans.

According to informed sources, the two companies are working to produce NAND flash chips with more than 200 layers at their Chinese factories, bringing the production line processes up to the level of their Korea-based facilities.

NAND flash memory is a type of storage chip that retains data even without power, widely used in smartphones, PCs, and AI data center solid-state drives. The more layers a single chip stacks, the higher the storage density and the lower the cost per storage unit.

Samsung Targets 286-Layer Chips

According to two sources, Samsung’s plant in Xi’an, northwestern China, accounts for about 40% of the company’s global NAND output and is currently producing chips with around 200 layers.

One of the sources said that, as part of an internally codenamed project “Monami,” Samsung is upgrading the plant to produce 286-layer V9 NAND chips, with a target to reach a monthly output of 5,000 wafers by December this year and scaling up to 40,000 wafers by December 2027.

Samsung stated that its upgrades are in compliance with U.S. export regulations and added: “This upgrade aims to meet the growing demands of global customers, including those in the U.S. The company is not expanding capacity or building new manufacturing facilities.”

According to three sources, SK Hynix seeks to switch its factory in Dalian, northeastern China, to the production of NAND products with 240 layers and above.

One source noted the company currently produces 192-layer products in Dalian.

SK Hynix acquired the Dalian plant when it bought Intel’s (INTC.US) NAND business in 2021; this remains the only production base for the business's NAND chips. The business, now known as Solidigm, is preparing for an initial public offering in the U.S.

One of the sources indicated the company received approval to produce up to 240-layer chips in Dalian, and may seek U.S. permission to conduct R&D for chips exceeding 300 layers at the site, which would help lay the groundwork for potential production in the U.S. The company is in talks with the Trump administration regarding plans to construct a new NAND plant in the U.S.

The U.S. Department of Commerce’s Bureau of Industry and Security did not directly respond to questions regarding the approval status for Korean chipmakers. The office only reiterated its 2025 statement, stating its intent to issue license applications for these companies to operate their existing factories in China, but not to approve capacity expansion or technical upgrades.

YMTC Continues to Catch Up

While Samsung and SK Hynix struggle with how much to invest in their Chinese factories, YMTC is experiencing rapid growth.

According to research institute Omdia, YMTC captured 38.5% of the NAND market share in China in the second quarter of this year, up from 28% for the whole of 2025, surpassing Samsung. By contrast, Samsung’s share dropped from 36% to 33.5%, while SK Hynix’s share decreased from 20% to 17%.

According to two other sources, YMTC’s product lineup mainly consists of 160-layer and 232-layer NAND chips, but it also manufactures a small volume of 294-layer chips and plans to produce products exceeding 300 layers.

YMTC did not respond to requests for comment.

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