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“Don’t friend you anymore”

I think that describes the relationship between the United States and China in the past few years. The US is at it again.

It’s planning to restrict the access of AI memory chips and equipment to China again, and it’s enlisting the help of Japan, South Korea, and the Netherlands.

These 3 countries produce most of these products for the world. More specifically, Micron Technology, SK Hynix, Samsung, and ASML are the companies that will be affected.

All these companies have pretty significant exposure to China. SK Hynix derives about 31% of its revenue from China, followed by ASML (26%), Micron (14%), and Samsung (11%).

South Korea, Japan, and the Netherlands are expected to play ball with the US as they have done so in the past. But I get the nagging feeling that these companies will try to circumvent some of these restrictions.

When this news was announced on 1 August 2024, these were how much share prices dropped on the following day.

SK Hynix: -10.4%

ASML: -11.2%

Micron: -8.7%

Samsung: -4.2%

China is still a large revenue driver for these countries, and while the US ban only applies to certain products (more specifically, the HBM chips), investors are worried about the impact on their financial performances in the coming months.

There are a couple of things that you should look out for. Firstly, the US will announce a comprehensive package that includes all the restrictions by the end of August. How much restrictions in the package will determine how much revenue will be impacted in these companies.

Secondly, watch out for the third-quarter financial reports that are scheduled to come out in October and November. All the companies mentioned above will give their opinions on how the US bans will affect them.

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