Samsung and SK Hynix Upgrade China Chip Plants as AI Demand Intensifies

South Korean semiconductor manufacturers Samsung Electronics and SK Hynix are upgrading their manufacturing operations in China to produce more advanced NAND memory chips, according to people familiar with the plans cited by Reuters.

The reported upgrades come as demand for memory used in smartphones, computers and artificial intelligence infrastructure grows, while Chinese competitor Yangtze Memory Technologies Co. (YMTC) continues to expand its position in the domestic market. The plans also highlight the difficult choices facing international chipmakers operating in China under United States export-control rules.

Samsung is reportedly preparing its Xi'an facility in northwestern China to manufacture 286-layer V9 NAND flash memory chips. The plant currently produces chips with around 200 layers, according to Reuters, which cited people familiar with the project. The company is targeting an initial monthly output of 5,000 wafers in December 2026, with a potential increase to 40,000 wafers per month by December 2027.

Samsung said the upgrade was being carried out in close consultation with US authorities and in compliance with American export regulations. The company also said the project was intended to meet demand from global customers and did not involve expanding production capacity or building new manufacturing facilities.

SK Hynix is reportedly looking to produce NAND products with 240 or more layers at its Dalian operations in northeastern China. The facility currently manufactures products with around 192 layers, according to Reuters. SK Hynix said it had been installing equipment at the factory in consultation with the US government.

NAND flash memory is a type of non-volatile storage that retains data when power is removed. It is widely used in consumer electronics and solid-state drives, including storage systems deployed in data centers. Increasing the number of layers in a memory chip can improve storage density and help lower costs, although actual performance and economics depend on the design and manufacturing process.

The upgrades come against a backdrop of tighter US controls on semiconductor equipment and technology exports to China. Both companies must seek US licenses annually to install certain American-made equipment at their Chinese factories. Washington has also indicated that it does not intend to approve licenses for technology upgrades or capacity expansion at these foreign-owned facilities in China, according to Reuters.

That regulatory environment creates uncertainty for companies seeking to maintain older facilities while keeping their products competitive. The precise scope of approvals for the newly reported upgrades was not fully established in the Reuters report, and the plans should not be interpreted as evidence that all required export licenses have been granted.

Meanwhile, YMTC has gained ground in China's NAND market. Citing research firm Omdia, Reuters reported that YMTC held 38.5% of the domestic market in the second quarter of 2026, compared with 28% for all of 2025. Samsung's share was reported at 33.5%, while SK Hynix's share stood at 17%.

The market-share figures help explain why the Korean companies are seeking to modernize their China operations. They also show how domestic semiconductor development is changing competitive conditions in one of the world's largest electronics markets.

For the wider supply chain, the outcome could affect where memory chips are manufactured, how quickly companies adopt new production technologies and how much investment they allocate to different regions. AI infrastructure has increased the importance of high-density storage, but memory manufacturers must balance that demand against regulatory constraints and the costs of upgrading production lines.

The plans also illustrate the complexity of separating commercial supply chains from geopolitical restrictions. Samsung and SK Hynix serve customers around the world, and decisions affecting their Chinese facilities can influence production planning beyond China itself.