U.S. Revokes Chip Equipment Authorizations for Samsung and SK Hynix in China

The United States is tightening restrictions on semiconductor manufacturers Samsung and SK Hynix by revoking their authorizations to obtain U.S. semiconductor production equipment in China. Previously, the U.S. Commerce Department had granted these companies exemptions as part of the expansive restrictions implemented in 2022 regarding the sale of semiconductor equipment to China. As a result of the recent changes, these companies will now need to seek licenses for purchasing such equipment in China.

Alongside Samsung and SK Hynix, Intel has also lost its exemption, although it had sold its unit in Dalian, China, earlier this year. The new licensing requirements are set to take effect in 120 days, according to federal postings. The Commerce Department mentioned that while it would allow applications for licenses related to the existing operations in China, it does not plan to approve any requests that aim to expand production capacity or modernize technology.

The changes in licensing are likely to hinder sales for U.S. equipment manufacturers such as KLA, Lam Research, and Applied Materials, with share prices reflecting the market's concerns—Lam's shares fell by 4.4%, Applied Materials dropped 2.9%, and KLA went down by 2.8%. Previously, officials had hinted at these moves as a precautionary measure amidst a fragile trade relationship between the U.S. and China, where tariffs on imports from both countries remain in place until November.

Chris Miller, an expert on the semiconductor industry, pointed out that this change will challenge Korean chipmakers' abilities to produce advanced chips in China. It may, however, provide a pathway for Chinese equipment manufacturers to fill production gaps and could potentially benefit Micron, a major U.S. rival in the memory chip market. Miller stressed the significance of accompanying measures against Chinese chipmakers, as failing to do so could create space for Chinese companies to flourish at the expense of their Korean competitors.

Moreover, many license applications from U.S. companies to export various goods and technology to China are currently pending, exacerbating a backlog issue that includes billions of dollars in semiconductor manufacturing equipment. Samsung and SK Hynix currently hold Validated End User status, facilitating easier access for U.S. suppliers to send goods; however, this status will be revoked, complicating future transactions.