The U.S. government has decided to indefinitely postpone export controls on equipment for Samsung Electronics and SK hynix’s semiconductor plants in China. While there’s some relief in the semiconductor industry, uncertainties over their China plants haven’t entirely vanished, making the incentive for these companies to invest heavily in China still limited.
On Oct. 9, at the Presidential Office building in Yongsan, Seoul, Choi Sang-mok stated, “Through recent dialogues with U.S. export control authorities and the National Security Council, Samsung Electronics and SK hynix’s semiconductor plants in China have been designated ‘Verified End Users’ according to U.S. export control regulations.” He added, “The U.S. government has made the final decision to supply American equipment to these plants in China without separate approval processes or time restrictions. This decision signifies a resolution to the major trade issue facing South Korean semiconductor companies.”
The VEU is a comprehensive licensing approach that allows specific items to be exported to pre-designated companies. With VEU status, there’s no need to obtain separate permissions for each shipment of U.S.-made semiconductor equipment; only prior submission of an equipment list is required, effectively resulting in an indefinite postponement of U.S. export controls.
Last October, the U.S. Department of Commerce had announced that it would control exports of U.S. semiconductor equipment to companies producing semiconductors in China. Samsung Electronics and SK hynix received a one-year reprieve from this measure. Ahead of the expiry of this grace period this month, the Korean government had been in talks with the U.S. Department of Commerce.
Choi emphasized that Samsung Electronics and other related companies have already been notified of this U.S. decision and that it takes effect immediately. He noted, “The uncertainties around operating and investing in semiconductor plants in China for Korean companies have significantly reduced. This offers them a stable platform to strategize their global operations.” He attributed this achievement to the strengthened alliance between South Korea and the U.S. and the collaborative efforts of both the government and businesses.
With eased semiconductor regulations, both Samsung Electronics and SK hynix are expected to gain momentum in their Chinese operations. The environment is now conducive for resuming long-term investment and operational planning for semiconductor facilities in China. A Samsung Electronics representative said, “Close consultations between various governments have significantly reduced uncertainties in operating semiconductor production lines in China. We will do our utmost to stabilize the global semiconductor supply chain.” An SK hynix representative expressed, “The U.S. government’s decision to extend the export control reprieve will significantly contribute to stabilizing the global semiconductor supply chain. We will adhere to international regulations and do our utmost for the development of the global semiconductor industry.”
However, the Semiconductor Support Act Guardrail provision introduced by the U.S. government last month remains in effect. The provision limits the expansion of semiconductor production facilities in China that receive subsidies to 5% over ten years. Older-generation general-purpose semiconductor facilities can only be expanded by less than 10%. Thus, the path to expanding plants in China is still blocked. Additionally, the potential for further U.S. sanctions on Chinese semiconductors persists. An industry insider commented, “While there’s a 5% expansion limit, it shouldn’t hinder maintenance or upgrades.”