US makes it harder for SK Hynix, Samsung to make chips in China

The US has decided to revoke authorizations that allowed chipmakers Samsung and SK Hynix to receive American semiconductor manufacturing equipment in China, making it more challenging for them to produce chips in the country, as reported by the Federal Register.

The exemptions given by the US Commerce Department to these companies have been rescinded under the sweeping restrictions imposed in 2022 on the sale of US semiconductor equipment to China.

Both Samsung and SK Hynix will now be required to obtain licenses to purchase equipment for their operations in China. The revocations will come into effect in 120 days, according to the official filing.

While the Commerce Department aims to grant licenses to allow the companies to continue operating their existing facilities in China, it does not intend to approve licenses for expanding capacity or upgrading technology.

SK Hynix mentioned in a statement that they will work closely with the Korean and US governments to minimize the impact on their business, while Samsung did not provide any comment on the matter.

The South Korean government has emphasized to the Commerce Department the importance of stable operations of semiconductor companies in China for the global semiconductor supply chain’s stability.

Seoul will continue discussions with Washington to mitigate the implications on South Korean companies, as per the industry ministry’s statement.

On the other hand, China’s commerce ministry spokesperson expressed opposition to the US decision and stated that necessary measures would be taken to protect the legitimate rights and interests of enterprises in response.

The licensing changes are likely to affect sales to China by US equipment manufacturers such as KLA Corp., Lam Research, and Applied Materials.

With the announcement of these revocations, the market dynamics for chipmakers may shift, potentially benefiting domestic Chinese equipment manufacturers and US competitors like Micron in the memory chip sector.

Thousands of license applications by US companies to export goods and technology to China have been pending, leading to a significant backlog, including requests for semiconductor manufacturing equipment worth billions of dollars.

Foreign chipmakers like Samsung and Hynix had previously enjoyed Validated End User status, allowing them to receive goods from US suppliers more efficiently. However, this status will now be removed, impacting their supply chain operations.