SEOUL, January 28 (AJP) - South Korean semiconductor giants SK hynix and Samsung Electronics are facing new market pressures after Chinese artificial intelligence startup DeepSeek demonstrated its ability to build advanced AI systems using fewer, low-cost chips, potentially disrupting the lucrative high-end memory market.
Industry analysts predict both companies will encounter short-term challenges in their AI-focused memory chip businesses, particularly in the high-bandwidth memory (HBM) segment, where SK hynix has enjoyed a near-monopoly as a supplier to AI chip leader Nvidia.
DeepSeek unveiled its large language model V3 last year and the reasoning-focused R1 earlier this month. The V3 model cost just $5.57 million to develop, achieved with fewer high-end chips than typically required.
The company's achievements highlight limitations of U.S. export restrictions on AI chips to China.
DeepSeek has demonstrated competitive AI capabilities using Nvidia’s H800 chips, designed with downgraded performance for the Chinese market.
Nvidia's stock plunged 17 percent on Monday following DeepSeek's announcement that challenged the U.S. firm's high-cost strategy.
SK Hynix supplies HBM chips exclusively for Nvidia's flagship AI products, while Samsung Electronics conducts quality tests for its next-generation HBM3E memory aimed at future Nvidia platforms.
“There could be temporary concerns about revenue decline, but ultimately, DeepSeek still developed its AI model using Nvidia chips, suggesting Nvidia's market dominance will continue for the foreseeable future,” an industry official said.
The memory chip sector, known for its volatile supply-demand dynamics, could see increased price fluctuations in the short term.
However, some observers believe DeepSeek’s cost-efficient approach could ultimately benefit Korean chipmakers by expanding the AI market.
"The lower barrier to entry could stimulate broader adoption of AI technologies, potentially increasing overall demand for memory chips," another industry source said.
The development comes as Korean semiconductor manufacturers face growing challenges, including competition from Chinese rivals and trade tensions between the U.S. and China, their two largest markets.
The Trump administration is expected to tighten restrictions on advanced technology exports to China, potentially straining global semiconductor supply chains. China likely will accelerate efforts to achieve semiconductor self-sufficiency in response, possibly impacting South Korea's exports.
Industry experts advise that Korean chipmakers should focus on maintaining their technological advantages in high-performance semiconductor design and advanced manufacturing processes while developing differentiation strategies to navigate the evolving AI landscape.
reporter
Park Sae-jin
swatchsjp@ajunews.com
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