A Chinese flag is displayed next to a "Made in China" sign seen on a printed circuit board with semiconductor chips, in this 2023 illustration picture. Reuters-Yonhap

Chinese memory chipmakers are increasingly seen as a threat to the profitability of Samsung Electronics and SK hynix, as they undercut prices of their legacy DRAM products. This shift comes amid concerns over the potential implementation of protectionist trade policies under the incoming Donald Trump administration.

According to market tracker DRAMeXchange, most DRAM products showed downside movements in their spot prices during Wednesday's trading sessions. Of them, the DDR4 16-gigabyte 1Gx16 3200 declined by 0.42 percent from a session earlier, while other mainstream products also slightly slipped or remained unchanged.

Analysts noted that the decline in DRAM prices is continuing due to lingering concerns about oversupply of older products.

The downtrend is attributed to Chinese firms' aggressive efforts to boost their supply as part of their volume-driven strategies, even at the cost of operating at losses.

According to Taiwan's DigiTimes, Monday, Chinese DRAM makers, including ChangXin Memory Technologies (CXMT) and Fujian Jinhua, are selling their DDR4 chips at half the prices of major manufacturers, including Samsung, SK and Micron of the United States. The report also said Chinese manufacturers are offering DDR4 prices 5 percent lower than recycled secondhand products on the market.

Industry officials said that such moves are assumed to be part of their strategies to secure clients and supply channels before the Trump administration imposes high tariffs and implements other stringent policies targeting Chinese chips.

To counter U.S. pressure, Chinese firms are ramping up their production.

According to a report from Nomura Securities, CXMT has rapidly increased its DRAM production capacity, from 70,000 wafers per month in 2022 and is projected to reach 200,000 this year, accounting for 15 percent of the global DRAM market. The company is focusing on DDR4 and LPDDR4 for mobile devices, which began to circulate in the market in 2013.

Fujian Jinhua Integrated Circuit, which suffered a U.S. sanction in 2018, is also increasing its wafer production, focusing on DDR4 products.

During the China International Semiconductor Expo on Monday, Chen Nanxiang, chairman of leading NAND maker Yangtze Memory Technologies, said "the (Chinese) industry will work together as a group to address our shared challenges,” according to Nikkei Asia.

Samsung Electronics' LPDDR5X / Courtesy of Samsung Electronics

Chinese memory makers' plans to ramp up supply is posing risks to Samsung Electronics and SK hynix.

Citing market tracker TrendForce, LS Securities said that Samsung Electronics DRAM inventory level stood at 17 weeks currently, up from 15 weeks in the third quarter. That of SK hynix also inched up to 12 weeks from 11 weeks during the same period.

Samsung's DRAM sales in the third quarter of this year stood at $8.59 billion, accounting for 39.8 percent of the total sales from its chip division. SK hynix's DRAM revenue was $8.93 billion, representing 69 percent of its total sales.

To avoid possible impact, the companies have been focusing on expanding the share of high-value products, such as DDR5 or high-bandwidth memory (HBM) chips, in their sales mix.

Samsung Electronics said in its earnings call earlier this month that “the company plans to maintain a flexible investment strategy aligned with market conditions, focusing on the transition to high-value products such as HBM and DDR5.”

SK hynix also said in its earnings call for the third quarter of this year that “legacy products such as DDR4 and LPDDR4 are becoming more competitive following the increased supply from Chinese manufacturers” and the company will “quickly reduce legacy products and accelerate the development of premium products.”