South Korean Semiconductor Giants Can Continue Supplying U.S. Equipment to China Plants Without Requiring Yearly Approvals
In a significant development for the semiconductor industry, South Korea’s leading chip manufacturers, Samsung and SK Hynix, have received indefinite waivers to export U.S. semiconductor manufacturing equipment to their China-based factories. This decision, reported by South Korea’s Yonhap News Agency, allows the companies to bypass the need for separate U.S. approvals for every shipment, providing much-needed stability to their operations.
Choi Sang-mok, Seoul’s senior presidential secretary for economic affairs, expressed the importance of this development, stating, “The U.S. government’s decision means that the most significant trade issue of our semiconductor companies has been resolved.” Choi’s comments underscore the relief felt by both firms regarding their chip production in China, which relies partially on U.S.-sourced equipment.
This decision marks a departure from the previous practice of obtaining one-year waivers from the U.S. government to continue importing advanced tools for their China-based plants. The previously required waivers would have expired this month, raising concerns for the companies.
Samsung Electronics and SK Hynix have a substantial presence in China’s chip manufacturing landscape. Approximately 40% of Samsung’s total flash memory chips (NAND) production capacity is based in China, as reported by Fitch. Meanwhile, China accounts for 40% to 50% of SK Hynix’s dynamic random access memory (DRAM) chips production and 20% of its NAND capacity.
In the global semiconductor arena, Samsung Electronics and SK Hynix occupy the top two positions in the dynamic random access memory (DRAM) market, according to data from market research firm TrendForce, with U.S.-based Micron in third place.
This development comes in the context of the U.S. government’s efforts to restrict China’s access to high-tech semiconductor chips, motivated by concerns that these chips could enhance China’s military capabilities. In October of the previous year, the U.S. introduced comprehensive rules aimed at limiting China’s ability to obtain or produce high-tech semiconductor chips.
In response to these restrictions, Beijing has made significant investments in its domestic semiconductor industry, demonstrating notable progress in the development of advanced chips. An example of this progress is Huawei’s recent launch of a 5G-enabled smartphone, despite existing U.S. sanctions. The smartphone featured a 5G processor produced by the domestic firm Semiconductor Manufacturing International Corporation, exceeding industry expectations regarding the company’s chip capabilities.
With this latest decision, Samsung and SK Hynix gain the assurance and flexibility required to maintain their robust presence in China’s semiconductor manufacturing landscape, contributing to the stability and growth of the global semiconductor industry.