The DeepSeek logo (Reuters-Yonhap)
The DeepSeek logo (Reuters-Yonhap)

South Korea’s top two chipmakers -- Samsung Electronics and SK hynix -- are closely monitoring the impact of DeepSeek, the Chinese artificial intelligence startup that has shaken global markets with its breakthrough technology, according to industry sources on Sunday.

The nation’s stock market, which reopened a week after the Lunar New Year holiday on Friday, saw turbulence due to the shockwave triggered by DeepSeek’s AI model. SK hynix’s stock price plummeted 9.86 percent by the closing bell. Samsung also saw a 2.42 percent decline.

DeepSeek has garnered global attention for achieving ChatGPT-level performance while significantly reducing development costs. The turmoil stemmed from reports that the Chinese AI startup had developed an AI model comparable to ChatGPT at 5.6 percent of the cost incurred by OpenAI.

It is reported that the training of its AI model relied on Nvidia’s H800 chips -- designed specifically for the Chinese market with downgraded specifications to comply with US export restrictions.

Nvidia has long dominated the GPU market for training and running generative AI models, emphasizing a high-performance, high-cost strategy. However, the emergence of a more cost-effective alternative with comparable or superior capabilities threatens Nvidia’s dominance.

Market experts voice concerns that it would likely pose a short-term risk for Korean companies, particularly SK hynix, which supplies high-bandwidth memory chips to Nvidia.

“Korean firms have been focusing on high-performance HBM memory. If advanced AI models can be developed using lower-spec HBM, demand for Samsung and SK hynix’s memory chips may decline in the short term,” said Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University.

On the other hand, some industry sources see long-term opportunities as the overall AI market expands.

“AI development has traditionally required significant investment and had high entry barriers, but with more players entering the market, the AI ecosystem is set to grow,” said an industry source, who asked for anonymity. “Since Nvidia’s H800 chips still require HBM, demand for high-end memory will likely remain strong.”

During the earnings call on Friday, Samsung’s Memory Chip Division Executive Vice President Kim Jae-jun addressed questions around DeepSeek, saying, “We are closely monitoring industry trends under various scenarios. As the market presents both long-term opportunities and short-term risks, we will ensure timely responses to rapid changes.”

Some experts, however, warn of potential negative impacts if the US government tightens restrictions on technology exports to China in response to DeepSeek’s success. “If this event leads Washington to ban all Nvidia GPU sales to China, it would impact both Nvidia and domestic DRAM suppliers,” iM Securities analyst Song Myung-sup said.

Kim Yang-paeng, a senior researcher at the Korea Institute for Industrial Economics and Trade, acknowledged the challenges posed by US sanctions but remained optimistic. “While Korean companies may face export restrictions to China, the expanding AI ecosystem will open up new supply opportunities in other markets, mitigating any losses,” he said. “In the long run, the trend of low-cost, high-performance AI models could create more opportunities for Korean firms.”

In the meantime, Samsung, which failed to make a breakthrough in HBM and recorded a chip operating profit of 2.9 trillion won ($2.06 billion) in the fourth quarter of last year, plans to accelerate the production of high-performance, high-capacity semiconductors this year.

SK hynix is also reportedly planning an investment of over 10 trillion won, including converting existing outdated memory production lines into HBM lines.

However, sources predict that with the emergence of DeepSeek increasing market volatility, both companies are expected to weigh various scenarios carefully in their production and investment plans.

By Jie Ye-eun (yeeun@heraldcorp.com)