Shares of Asian chipmakers rallied on Thursday after Micron Technology‘s bullish outlook overnight, which indicated the sector’s supply glut may finally be easing.

The U.S. chipmaker reported third quarter earnings that beat estimates, thanks to higher demand for its memory chips driven by the booming A.I. sector.

“We believe that the memory industry has passed its trough in revenue, and we expect margins to improve as industry supply-demand balance is gradually restored,” CEO of the U.S. memory chipmaker Sanjay Mehrotra said in a statement.

Shares of Japanese semiconductor company Electron rose 3.26%. Hong Kong-listed Hua Hong Semiconductor added 1.82%. South Korea’s SK Hynix traded 1.67% higher.

Micron’s shares rose 3% in extended trading hours.

However, China’s ban on Micron’s chips remains a “significant headwind” that is impacting the company’s outlook and slowing its recovery, Mehrotra cautioned.

Last month, Chinese authorities announced Micron products failed its network security review and declared it a “major security risk” to China’s critical information infrastructure.

Micron’s third-quarter revenue came in at $3.752 billion, beating Reuters’ estimates of $3.646 billion, data from Refinitiv showed.

“We have increased confidence that the industry has passed the bottom for quarterly revenue and year-on-year revenue growth,” Mehrotra added.

Patrick Moorhead, CEO of Moor Insights & Strategy is upbeat about Micron.

“If you’re looking long term, Micron is good bet because it has advantages technologically that its competitors don’t,” he told CNBC’s “Street Signs” on Thursday.

However, he highlighted that while Micron is going to get some lift from the advent of AI, the overall server market is still lagging, a view echoed by the company.

“Generative A.I. is driving higher-than-expected industry demand for memory and storage for A.I. servers, while traditional server demand for mainstream data center applications continues to be lackluster,” Micron’s statement said.

The U.S.-China chip war could impact South Korea’s chip giants as China accounts for a large chunk of their production capacity — but there shouldn’t be long-term disruptions, according to Fitch Ratings.

Samsung Electronics and SK Hynix face risks as the U.S. seeks to block China’s access to advanced semiconductor chip equipment, according to the June 7 report.

China accounts for 40% of Samsung’s total flash memory chips (NAND) production capability, said the analysts led by Matt Jamieson. It also accounts for 40%-50% of SK Hynix’s dynamic random access memory (DRAM) chips and 20% of its NAND capacity.

“We do not think there would be a major long-term supply disruption, as it is likely that Korea will become the main location for the two companies’ expansionary investment and technology upgrades,” the credit ratings agency said in the June 7 report.

The U.S. in October introduced sweeping rules to cut off China’s access to obtain or manufacture high-tech semiconductor chips. They came as concerns grew over China’s ability to use such high-tech chips to advance its military capabilities. The Netherlands and Japan are reportedly poised to follow suit.

Samsung Electronics and SK Hynix are the two largest manufacturers of memory chips globally, followed by U.S.-based Micron in third place. Memory chips are storage devices used in computers, smartphones and tablets.

The companies’ fabrication plants in China make advanced chips as well as older chips, which are exempted from the U.S. restrictions. The memory chips are produced for Chinese consumption as well as exports.

However, the two chip giants obtained one-year waivers from the U.S. to continue importing advanced tools for their China plants until October, according to the Korea Times.

“Should the U.S. not extend the waiver, we expect the companies to continue producing memory chips at their Chinese plants using already installed technology,” said Fitch Ratings.

In what is seen as a retaliatory move, China banned the sale of products from Micron for use in critical information infrastructure in May.

Fitch Ratings said Samsung and SK Hynix “may benefit from higher chip prices within China as a result. However, the impact is likely to be small and could be offset if Micron redirects the sale of its memory chips outside of China, as this would probably lower global chip prices.”

The White House reportedly urged South Korea not to let its chipmakers fill Micron’s void in China. Around 10% of Micron’s revenue come from China, according to Micron’s fiscal 2022 report.

The Fitch report said the two South Korean chipmakers will at least partially fill Micron’s gap. “It will be difficult to monitor what capacity lost by Micron is actually filled by the Korean companies, given the commodity-like nature of memory chips.”

“The logistics of this strategy could take time, but could offset any positive impact Samsung Electronics and SK Hynix may obtain from the ban on Micron within China in light of the world’s memory chip oversupply,” the analysts said.

However, risks could further increase if the U.S. or China implement more extreme rulings and bans, as it will affect the cost and availability of semiconductor supply-chain components, they added.

South Korea’s finance minister says the nation sees is at a “turning point” in economic relations with Japan.

Speaking to CNBC’s Chery Kang at the Asian Development Bank’s annual meeting in Incheon, South Korea’s finance minister and deputy prime minister Choo Kyung-ho praised Tokyo’s recent decision to restore South Korea to a list of preferred trade partners.

“My understanding is that Japan is processing this according to its legislative and administrative procedures,” Choo said, according to a CNBC translation. adding that South Korean officials hope the process will be completed “as soon as possible.”

“We believe that unnecessary regulations between the two countries will be entirely removed, and we believe that we’re now at a turning point for further cooperation between the two economies,” said Choo.

The thaw in Japan and Korea’s bilateral relations comes after South Korea announced its companies would compensate people who were forced to work during Japan’s 1910-1945 occupation of Korea – a bid by South Korean President Yoon Suk-yeol to improve the strained ties between the two nations.

Earlier this week, the two countries also held their first bilateral finance ministerial meeting in seven years, agreeing to resume regular talks “at an appropriate timing,” according to reports of Choo’s Japanese counterpart Shunichi Suzuki’s remarks after his meeting.

Choo said the recent talks with Suzuki will lead to further economic cooperation between the two U.S. allies.

“The recent bilateral summit has opened things up for improvement. So we can now anticipate cooperation between the two countries, in expansion of industrial and technology cooperation, as well as humanitarian exchange programs for youths,” he said. “We believe this will benefit both countries mutually, economy-wise, and contribute to the regional growth as well,” he said.

Choo added that the bilateral relationship will be “mutually beneficial” for high-tech industries, including semiconductors.

“Especially in sectors that we see both countries being placed in a ‘win-win’ situation, such as strengthening high-tech industrial sectors – we believe this is why Japan and Korea are both actively taking part in pushing for further cooperation through ministerial talks and dialogue between government agencies, which we plan to strengthen further,” he said.