Samsung, SK Hynix granted 1-year waivers from US chip controls on China

Posted on : 2022-10-13 17:20 KST Modified on : 2022-10-13 17:20 KST
Anxieties remain high about the mid- to long term
Samsung Electronics breaks ground on a new FAB2 line at its Xi’an plant in March 2018. (courtesy of Samsung Electronics)
Samsung Electronics breaks ground on a new FAB2 line at its Xi’an plant in March 2018. (courtesy of Samsung Electronics)

Samsung Electronics and SK Hynix have recently been allowed to supply the necessary equipment for their semiconductor production facilities in China for the next year without seeking prior US Department of Commerce approval.

With the US recently tightening its export controls on semiconductor equipment being sent to China, South Korean companies are obligated to obtain permission from the US Department of Commerce to continue their business activities. These two domestic companies have now reportedly acquired one-year waivers from the US.

According to a source in Washington on Wednesday, the US Department of Commerce recently notified Samsung Electronics and SK Hynix of the decision.

SK Hynix released a press statement the same day, stating that the company had “reached an agreement with the US Department of Commerce to supply the equipment needed for semiconductor production at [our] facilities in China for one year without [the need for] a separate US permit.”

Although Samsung Electronics did not make an official statement, they reportedly received the same news as SK Hynix.

Previously, the US Department of Commerce decided to strengthen control over cutting-edge semiconductors as well as memory chips, the latter being the main product produced by South Korean chipmakers.

Companies would have to require US permission if selling to firms producing DRAM chips above the 18-nanometer node or NAND flash chips below 128 layers.

In principle, US equipment producers cannot sell to Chinese companies, and foreign companies located inside of China are subject to examination on a case-by-case basis.

Samsung Electronics produces NAND flash memory in the Chinese city of Xi’an while SK Hynix produces DRAM and NAND flash memory in Wuxi and Dalian. The production of NAND flash memory at Samsung’s Xi’an plant accounts for 40% of the company's total supply.

Similarly, SK Hynix’s Wuxi and Dalian plants account for half of the company’s total DRAM production and 20%-30% of NAND flash production.

With this exemption granted by the US Commerce Department, Samsung Electronics and SK Hynix will be able to supply technologies to their Chinese production facilities for one year without the need for separate permission or a special screening procedure.

The US measures seem to have been adopted to reflect the plans of Korean semiconductor companies to upgrade their production facilities in China. The exemption also appears to take into account the possibility of hitches in semiconductor supply in the US.

While the two Korean chipmakers will be able to supply equipment to their Chinese facilities for a year without any problems, anxiety is still high.

Mid- to long-term uncertainty remains for South Korean companies since they are completely dependent on the decisions made by the US Department of Commerce. No one knows what the permission or screening standards will look like one year from now.

“It is impossible to supply equipment worth tens of billions to hundreds of billions of won in just one year,” one semiconductor industry official said. “With this much uncertainty, we have no choice but to think more about future investments,” the official added.

Similarly, a source in the US commented, “Right now, South Korean companies have found a way around export controls, but the problem is that we don't know what will happen in the future.”

Some also say that the role of the South Korean government in dealing directly with the US Department of Commerce has become more important now.

“We received a one-year exemption, but the situation in which the US determines the technological level of our companies’ semiconductor production facilities in China has not changed,” one analyst at a securities firm said.

“It is up to our government, not individual companies, to reduce uncertainty about the actions of the US Department of Commerce,” the analyst added.

By Lee Jeong-hun, staff reporter; Lee Bon-young, Washington correspondent

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