The US Department of Commerce has given permission to South Korean chip giants SK Hynix and Samsung to receive American-made semiconductor manufacturing tools at their Chinese factories indefinitely.
According to a report by South Korean news agency Yonhap, the US government’s authorization, which takes effect immediately, will allow both companies to continue their operations in China without having to apply for US licenses to get the specialized equipment.
Semiconductors are critical components of computer chips that power everything from smartphones to satellites. The item has been the topic of interest in the border technology warfare between the US and China.
South Korean Companies No Longer Need US Waiver To Produce Semiconductors In China
Last year, the Biden administration issued an executive order restricting shipments of advanced chipmaking tools to semiconductor factories in China as part of an effort to slow down Beijing’s technological and military advances and prevent the country from obtaining the advanced tech.
Samsung Electronics and SK Hynix, two of the leading semiconductor manufacturers from South Korea that partly rely on American equipment, had to obtain one-year waivers on a “case-by-case basis” from the US government to continue importing the advanced tools for their facilities in China. The waiver was set to expire this month.
According to a Fitch report, China is a major manufacturing hub for both companies. It accounts for 40% of Samsung’s total flash memory chip (NAND) production capability, while 50% of SK Hynix’s dynamic random access memory (DRAM) chips and 20% of its NAND capacity are manufactured in China.
Chinese Chipmakers Gain Record Profit In 2023, Forcing US To Backtrack Sanctions
In response to US efforts to curtail its tech sector, China poured billions of dollars into the domestic semiconductor industry to achieve self-reliance. Beijing’s efforts are said to have paid off pretty well as revenue from its top chip equipment makers surged in the first half of the year.
Chinese semiconductor companies previously heavily relied on foreign firms for specialized tools, which left them in the dust of the US, South Korea, and Taiwan. This was largely due to the chip supply chain being incredibly complex and made of numerous companies that range from design tool manufacturers for semiconductors to firms that manufacture the chip itself.
Things took a turn for China in 2019, when the Trump administration barred its leading technology firms, including Huawei and chipmaker Semiconductor Manufacturing International Corporation (SMIC), from receiving US technology and supplying or selling their equipment in the American market. The move forced China to boost its domestic chipmaking industry and seek more self-reliance by weaning itself off foreign technology.
Last month, Huawei, once considered to be a leading Android smartphone maker, launched a new 5G-powered smartphone. The processor found in the device was produced by SMIC and is now considered to be far more advanced than what many industry observers thought the company could possibly create.
Naura Technology Group Co., a top Chinese company that produces tools required for manufacturing semiconductors, saw its year-on-year revenue grow by 68% in the first half of 2023. Advanced Micro-Fabrication Equipment Inc. China (AMEC), the second-largest advanced equipment builder, reported that its revenue rose by 28% year-by-year in the first two quarters.
ACM Research, the third-largest semiconductor manufacturer, which specializes in making cleaning and packaging equipment for semiconductors, saw its revenue surge by 47% earlier this year.
South Korea Says the Most Significant Trade Issue Faced by the Country has been Solved
China’s rapid growth in the semiconductor sector led to the US government scrambling to give foreign chipmakers special authorization to avoid any unintended consequence of its sanctions affecting their production capacity.
On Friday, Taiwan Semiconductor Manufacturing Co (TSMC) issued a statement saying that it has been authorized to continue its operations in Nanjing, China. The semiconductor manufacturing giant is in the process of applying for permanent authorization to operate in the Chinese city and is expected to gain approval soon.
While speaking to reporters on Monday, South Korea’s presidential secretary for economic affairs, Choi Sang-mok, said that the U.S. government’s decision resolves the most significant trade issue faced by Korean semiconductor companies
Samsung Electronics and SK Hynix are the world’s largest and second-largest DRAM memory chipmakers.