SEOUL/BEIJING: Samsung Electronics and SK Hynix are upgrading their factories in China to produce more advanced memory chips to meet growing AI demand and compete with Chinese rival Yangtze Memory Technologies Co, according to four people familiar with the plans.

The South Korean chipmakers are working to manufacture flash NAND memory chips with more than 200 layers at their Chinese plants, whose products are currently less advanced than chips being produced in South Korea.

The upgrades come as both companies navigate U.S. restrictions on chipmaking equipment in China. They must seek U.S. licenses each year to install U.S.-made equipment, such as etching machines, in the country.

The U.S. Commerce Department's Bureau of Industry and Security said in 2025 that it did not intend to grant licenses to upgrade technology and expand capacity at the foreign chipmakers' factories in China.

Samsung told Reuters that upgrades were underway and being carried out in close consultation with Washington. SK Hynix said it has been installing equipment at its Dalian factory in northeastern China, in consultation with the U.S. government. Neither company disclosed details of the production plans Reuters reported.

It could not be determined how far U.S. authorities have gone in granting export licenses for equipment needed for the planned upgrades.

Samsung's Xian plant, which accounts for about 40 percent of the company's global NAND output, currently produces chips with about 200 layers, according to two people familiar with the matter.

Under a project known internally as "Monami," Samsung is converting the facility to produce 286-layer V9 NAND chips. It is targeting monthly output of 5,000 wafers in December this year and 40,000 wafers by December 2027, one of the people said.

Samsung said its upgrade complied with U.S. export regulations, adding: "The upgrade is aimed at meeting growing demand from global customers, including those in the US. The company is not expanding production capacity or constructing new manufacturing facilities."

SK Hynix is looking to switch its Dalian facilities to NAND products with 240 layers or more, according to three people familiar with the plans. It currently produces 192-layer products there, one person said.

One of the people said SK Hynix is authorized to make chips with up to 240 layers at Dalian and may seek Washington's permission to conduct research and development on chips with more than 300 layers. The company is also in discussions with the Trump administration over plans for a new NAND factory in the United States.

The Bureau of Industry and Security did not directly address questions about the status of approvals. It referred to its 2025 statement that it intended to grant license applications allowing the companies to operate their existing factories in China, but not to expand capacity or upgrade technology.

YMTC held 38.5 percent of China's NAND market in the second quarter, up from 28 percent for all of 2025, overtaking Samsung, according to research firm Omdia. Samsung's share fell to 33.5 percent from 36 percent, while SK Hynix's dropped to 17 percent from 20 percent.

Shares of Samsung and SK Hynix both ended six percent higher on October 21 after the Reuters report was published.