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

THE United States is making it more difficult for chipmakers Samsung and SK Hynix to produce chips in China by revoking authorisations that allowed the companies to receive American semiconductor manufacturing equipment there, according to the Federal Register.

The US Commerce Department had given the companies exemptions to sweeping restrictions created in 2022 on the sale of US semiconductor equipment to China.

The companies will now need to obtain licenses to buy the equipment for China. The federal filing also included Intel among the companies that lost their authorisation for China, but Intel sold its Dalian China unit in a deal that was finalised earlier this year.

The revocations will not take effect for 120 days, according to the posting.

The Commerce Department said in a statement that the United States plans to grant license applications to allow the companies to operate their existing facilities in China, but does not intend to grant licenses to expand capacity or upgrade technology.

The companies did not respond to requests for comment.

South Korea’s industry ministry said the government had been in contact with the US Commerce Department and explained “the importance of a stable operation of our semiconductor companies’ Chinese operations for the stability of the global semiconductor supply chain.”

It will continue discussions with the US government to minimize the impact on South Korean companies, the ministry said in a statement.

The licensing change will likely reduce sales to China by US equipment makers KLA, Lam Research and Applied Materials. The companies did not immediately respond to requests for comment.

Shares of Lam fell 4.4 per cent, Applied Materials dropped 2.9 per cent and KLA shares were down 2.8 per cent.

In June, when the Commerce Department raised the possibility of revoking the authorisations, a White House official said the United States was “just laying the groundwork” in case the truce in trade talks between the two countries fell apart.

In July, the two allies and major trading partners announced a deal on tariffs but South Korean President Lee Jae Myung came away from a summit with US President Donald Trump this week without finalising the agreement in writing.

The United States and China are now operating under a tariff truce, with levies of 30 per cent on Chinese imports to the US and 10 per cent Chinese duties on US goods locked in until November. The trade war between the world’s two largest economies has affected everything from rare earths needed by US industry to China’s purchase of US soybeans.

The White House did not have an immediate comment.

“This move will make it harder for Korean chipmakers with facilities in China to continue producing more advanced chips,” said Chris Miller, author of “Chip War.”

The move may help domestic Chinese equipment makers, whose tools can fill gaps. It also may help Micron, a major US competitor to South Korea’s Samsung and SK Hynix in the memory chip sector.

“If this isn’t accompanied by further steps against (Chinese chipmakers like) YMTC and CXMT, it risks opening market space for Chinese firms at the expense of the Korean firms,” Miller said.

Thousands of license applications by US companies to export goods and technology to China also have been in limbo in recent months, creating a massive backlog, as Reuters reported earlier this month, including for billions of dollars’ worth of semiconductor manufacturing equipment.

Foreign chipmakers like Samsung and Hynix now have what is known as Validated End User status, which allows US suppliers to ship goods to them “more easily, quickly and reliably,” as the Commerce Department says on its website, than they would if export licenses were required. That VEU status will be removed. REUTERS