U.S. expected to lengthen China exemptions for Korean chipmakers

Industry

Published: 02 Oct. 2023, 16:29

U.S. expected to lengthen China exemptions for Korean chipmakers

Samsung Electronics' NAND flash memory chip production facility in Xi'an, China [SAMSUNG ELECTRONICS]

The U.S. government is expected to indefinitely extend Korean chipmakers’ one-year exemptions on controls concerning chip technology exports to China, clearing up some uncertainties surrounding local companies’ Chinese semiconductor manufacturing operations.

The official announcement is likely to be made this week, according to industry sources.

In October last year, the United States issued export regulations to make it nearly impossible for companies to supply their factories in China with technologies for the making of DRAM memory chips rated 18 nanometers or less and NAND flash memory chips with 128 layers or more. The export controls are intended to slow down China's technological advances in the chip industry.

Yet the U.S. government granted one-year waivers to Samsung Electronics and SK hynix out of consideration of the companies' hefty investments in their Chinese chip facilities.

The initial exemption, which was granted in October last year, was set to expire on Oct. 11.

The Samsung Electronics’ plant in Xi'an, China, produces about 40 percent of the company's NAND flash output. The SK hynix plant in Wuxi makes 40 percent the company's DRAMs, and its Dalian plant accounts for 20 percent of the company’s whole NAND flash production.

As the exemptions are to be extended for an indefinite period, the U.S. government is likely to name the Korean companies as Validated End-users, or VEU, granting a comprehensive permit that would allow previously licensed companies to import certain chip manufacturing equipment into China without a separate review process.

However, there still remain uncertainties surrounding Korean companies’ operations in China, as the U.S. government barred chipmakers receiving subsidies under the CHIPS and Science Act from expanding their manufacturing capacity in “foreign countries of concern,” including China, for 10 years, in its “guardrails" finalized in September.

Meanwhile, the U.S. government announced an incentive program under the CHIPS and Science Act for the construction of smaller semiconductor facilities worth less than $300 million on Friday, after a similar funding program for projects worth $300 million or more was released in June. The latest incentive program offers subsidies worth 10 percent of the project’s total capital investments, which can be extended to up to 30 percent.

“The government will work closely with its U.S. counterpart to ensure smooth business operations and investment executions of Korean companies,” said the Ministry of Trade, Industry and Energy in a statement Friday.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]