South Korea is signaling its chipmakers could fill the gap after China banned Micron

Seoul signaled it would not intervene to block South Korea’s Samsung and SK Hynix from carving out a niche market after China banned U.S. chipmaker Micron, amid an escalating tech battle between the superpowers.

Last month, the White House quietly asked South Korea to urge its chipmakers to refrain from increasing sales to China if Beijing restricts sales of Micron products.

But Seoul policymakers on Monday said they were unwilling to wade into the debate and would defer to the companies.

“What the United States tells us to do or not to do is really up to our companies. Samsung and SK Hynix, which has global operations, will also make a decision on this,” South Korean Vice Minister of Commerce Jang Young-jin told reporters. Samsung and SK Hynix declined to comment on the matter.

Last year, Washington introduced strict chip export controls against China and slapped sanctions on Huawei and several of the country’s top tech titans. Beijing imposed sanctions on the US memory chip champion on Sunday, limiting its sales in the country on cybersecurity grounds following a seven-week review.

The measures outlined by China’s Cyberspace Administration against Micron will ban critical infrastructure operators from buying products containing the US company’s chips due to alleged “serious network security risks”.

Analysts say the ban is expected to force makers of servers, computers and other electronics sold in China to turn to South Korean chipmakers such as Samsung and SK Hynix for replacements, potentially benefiting from rising geopolitical tensions.

Samsung and SK Hynix are both working to grow their business in the US and need one-year waivers from the country to extend new equipment to their chip manufacturing facilities in China. The waivers are up for renewal later this year, giving Washington potential leverage against the companies.

Shares in Samsung and SK Hynix both ended the day up less than 1 percent, boosting what was expected to be a positive impact from China’s move against Micron. Micron shares fell 5 percent in premarket trading.

“There are not many Chinese companies that only get chips from Micron. Even if we increase our supply to Chinese customers, how can they look at these deals individually and judge that the increased volume is coming from us instead of Micron?” said a senior industry executive in Seoul.

The comments in Seoul came after a three-day G7 summit in Hiroshima, where leaders pledged to address Beijing’s use of economic coercion.

Although South Korea is not a member of the G7, the group has said it will work to create a mechanism with a wide range of partners to deter and respond to Beijing’s use of economic sanctions to advance its geopolitical goals.

Analysts said they expected a limited hit to Micron, which had sales of $30.8 billion in the last fiscal year, 16 percent of which came from companies based in mainland China or Hong Kong.

According to Dylan Patel, senior analyst at semiconductor research group SemiAnalysis, it’s very easy to switch between memory chips made by leading chip groups, suggesting that Micron’s long-term damage may be manageable.

“You can almost always swap out Micron memory components for Samsung or SK Hynix without making any changes,” he said. “Memory is a commodity, and supply chains adapt in a couple [of] accommodation.”

Additional reporting by Qianer Liu and Eleanor Olcott in Hong Kong and Nian Liu in Beijing