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Samsung concerned over 'unintended consequences' of U.S. restrictions on China

Published: 25 Apr. 2025, 10:42 Updated: 25 Apr. 2025, 13:39

The Samsung logo is seen in a flag outside Samsung Electronic's headquarters in Seocho District, southern Seoul, on Oct. 31, 2024. [YONHAP]

Samsung Electronics filed a formal opinion with the U.S. Department of Commerce last month expressing concern that Washington’s semiconductor sanctions on China could “stifle innovation.” The statement comes in response to a new rule requiring foundry companies to submit quarterly reports to the U.S. government detailing their customer information last mid-January.

Despite a series of U.S. sanctions, China has made strides in achieving self-sufficiency in advanced semiconductors — a paradox that Samsung reportedly highlighted to Washington, warning that the regulations could ultimately erode its own foundry market share.

The opinion was submitted on March 13 to the Bureau of Industry and Security (BIS) and addresses the interim final rule (IFR) regarding the "Implementation of Additional Due Diligence Measures for Advanced Computing Integrated Circuits." The document was publicly disclosed via the U.S. Regulations.gov portal website.

“Samsung’s submission is aimed at ensuring the interim final rule effectively protects U.S. national security while also mitigating regulatory burdens that could produce unintended consequences and stifle innovation,” the company said in its statement.

While the document does not specify the exact scenarios Samsung is concerned about, it notes that some materials were submitted confidentially due to potential negative business implications if made public.

“We are currently communicating with the U.S. side,” a Samsung spokesperson told the JoongAng Ilbo, an affiliate of the Korea JoongAng Daily.

The regulation, which took effect in February, received comments from industry officials which concluded last month, and the U.S. Department of Commerce is expected to announce the final rule soon. Other industry players, including U.S. semiconductor equipment manufacturers Applied Materials and KLA, as well as the Semiconductor Industry Association, have also submitted opinions.

The rule in question was announced on Jan. 16, just before the end of the Biden administration’s term. The regulation mandates that foundry companies identify their customers and report them quarterly to the U.S. government when producing semiconductors with more than 30 billion transistors using process nodes of 14 to 16 nanometers or smaller.

Then-BIS Under Secretary Alan Estevez said at the time that the rule would ensure that the semiconductors produced in foundry companies do not end up in blacklisted entities.

This move aimed to prevent scenarios like the one in which Huawei, using its tech company Sophgo, circumvented restrictions to procure chips from TSMC last year. Under the new rule, companies like Samsung, TSMC and Intel — along with 21 others — are held responsible for verifying their clients, with Sophgo and other suspicious firms added to its U.S. Entity List.

Industry insiders, however, warn that the regulation may backfire. If foundry firms are required to disclose client identities, they could lose orders from Chinese fabless customers — companies that design but do not manufacture chips. Samsung, which is already facing difficulties attracting clients, could be hit particularly hard.

Moreover, the regulation may end up strengthening China’s semiconductor independence. Since all major foundry firms — Samsung, TSMC and Intel — are subject to the rule, Chinese fabless firms are more likely to turn to domestic foundries like Semiconductor Manufacturing International Corporation (SMIC) instead.

“The strength of foundries comes from working with a diverse range of clients, which helps them accumulate technical expertise,” said one semiconductor industry official. “These U.S. regulations may end up boosting Chinese foundries by handing them more customers — accelerating China’s path to technological self-reliance.”

SMIC, which has hired many former TSMC engineers, ranked third globally in foundry market share in the fourth quarter of last year with 5.5 percent. Samsung followed with 8.1 percent, while TSMC remained dominant at 67.1 percent. The narrowing gap has led some to say, “Samsung’s real foundry rival is no longer TSMC — it’s SMIC.”

The SIA also expressed similar concerns in its comment to the Commerce Department.

“These policies must be designed to avoid unduly harming commercial innovation, manufacturing, employment and continued American leadership in critical technologies,” it stated.

These warnings reflect growing fears that rather than containing China, current U.S. sanctions may ultimately support Beijing’s semiconductor ambitions in the long run.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY PARK HAE-LEE [[email protected]]