Korean chipmakers not imperiled by new U.S. rules on China

Industry

Published: 09 Oct. 2022, 15:56 Updated: 09 Oct. 2022, 19:05

Korean chipmakers not imperiled by new U.S. rules on China

Visitors examine semiconductor chips on display at a Samsung Electronics booth during a semiconductor exhibition held at COEX on Oct. 5. [YONHAP]

Korean chipmakers will be little affected by the latest U.S. restrictions on semiconductor-related exports to China, the Korean government said in a statement.

On Friday, the U.S. Commerce Department announced a series of measures designed to limit China's access to technology that could be used in weapons or to develop weapons.

In its release on Saturday, the Ministry of Trade, Industry and Energy said that some of the advanced chips mentioned by the United States in the new rules are not a major focus for Korean companies, in particular semiconductors used in supercomputers.

It did note that the restrictions on artificial intelligence-related semiconductors could affect Korean companies in the future.

Samsung Electronics and SK hynix could be subject to restrictions related to DRAM memory chips rated 18 nanometers or less and NAND flash with 128 layers or more, but the ministry said that under the new rules, exceptions can be made for some companies.

According to the U.S. Commerce Department, while all entities owned by Chinese interests will be denied the technologies, implementation will be on a case-by-case basis for multinationals.

The United States is using the foreign direct product rule to prohibit the sale of products to China that use certain U.S. technologies. As the rule is global, companies everywhere are covered by it.

Graphical processing units, chips used in supercomputers and equipment for making advanced memory chips and processors are the focus of the rules announced Friday. The list covers products and technologies that China could use to make advanced weapons, improve military command, control and decision making infrastructure and improve the performance of autonomous weapons.

Coming just months after the passage of the Inflation Reductions Act, which has dented the business of Korean automakers, and the CHIPS Act, which could cap semiconductor investment in China, the new rules add to challenges Korean companies face as the United States targets Chinese manufacturing and materials.

It is also the latest U.S. measure that has caught the Korean government flatfooted and in damage control mode despite the strong relations between the two countries.

The Samsung Electronics plant in Xi'an, China, is the company's only memory chip production line overseas. It makes 40 percent of the company's NAND flash production and 10 percent of the world's total. The SK hynix plant in Wuxi, China, makes half its DRAMs.

Korean authorities said the U.S. government understands the important role Korean semiconductor production plays in global supply, adding that the United States and Korea have agreed to discuss the restrictions through a working group already in place for dialogue on supply-chain issues.

The Korean government said it will express its concerns during the 60-day public comment period.

According to a Yonhap report Sunday, Samsung Electronics and SK hynix said they will do their best to minimize the impact of the restrictions on their manufacturing in China, while a Reuters report citing unnamed sources said that the U.S. administration will do its best to limit the impact of the rules on the Korean manufacturers.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]