Washington tightens chip export rules, threatening Korean operations in China

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Washington tightens chip export rules, threatening Korean operations in China

Published: 22 Jun. 2025, 19:26

Audio report: written by reporters, read by AI

A model of SK hynix's high-bandwidth memory technology is displayed during the World IT Show at COEX in southern Seoul on April 25. [AP/YONHAP]

The U.S. Department of Commerce is moving to revoke export exemptions for Korean semiconductor makers operating in China, in a sign of escalating restrictions on chip technology flowing to Beijing.

Jeffrey Kessler, Under Secretary of Commerce for Industry and Security for the Trump Administration, told lawmakers at a House Foreign Affairs subcommittee hearing on June 12 that allied countries such as the Netherlands, Japan and Korea are weakening U.S. semiconductor export controls.

The Wall Street Journal reported on Friday that Kessler had informed Samsung Electronics, SK hynix and Taiwan’s TSMC and the United States "wants to revoke waivers" that allow them to import U.S.-made semiconductor equipment into their Chinese factories.

If implemented, the rollback would affect key production hubs.

Samsung produces about 40 percent of its NAND flash chips in China, while SK hynix makes roughly 40 percent of its DRAM and 20 percent of its NAND chips there.

Industry analysts estimate that China accounts for 10 to 15 percent of Samsung’s memory chip output and up to 35 percent of SK hynix’s.

The United States began restricting exports of semiconductor equipment to China in October 2022, requiring licenses for tools used in producing DRAM chips at 18 nanometers or below and NAND flash memory with 128 layers or more.

The curbs, however, had limited impact on Samsung Electronics and SK hynix’s operations in China.

Samsung Electronics' semiconductor plant in Pyeongtaek, Gyeonggi [JOONGANG ILBO]

The two Korean chipmakers received a one-year waiver, and after it expired, the U.S. government granted them Verified End User (VEU) status, allowing them to import most equipment without case-by-case approval.

With the exception of leading-edge tools such as extreme ultraviolet (EUV) lithography machines, they continued operating largely without disruption.

But the Trump administration now views that framework as a backdoor for China to acquire advanced equipment and seeks to tighten the loophole.

Industry insiders warn that the move will increase uncertainty across the global memory supply chain.

For instance, SK hynix reportedly transports wafers from its factory in Wuxi, China, to Korea for processing that requires EUV exposure tools, which cannot be installed in China due to export restrictions.

Even with VEU status, such logistical workarounds are necessary — revoking the status would complicate manufacturing further.

Samsung and SK hynix both declined to confirm whether they had received formal notice from Washington. But officials at both companies say they are closely monitoring U.S. political developments.

“We can’t have a situation where other countries undermine U.S. export controls by backfilling," Kessler said at the June 12 congressional hearing.

The FDPR allows Washington to control the export of foreign-made goods that use U.S. technology or equipment. The rule was applied last December to restrict exports of high-bandwidth memory (HBM) chips from Korea to China.

In another move, the U.S. Commerce Department recently scrapped the Biden-era “AI proliferation rule,” which had categorized countries into allies, general partners and adversaries for AI chip exports.

The Trump administration now plans to negotiate controls bilaterally. That shift means Korea, despite being a U.S. ally, will need to separately negotiate terms for China-bound AI chip exports — adding further uncertainty for Korean firms.

If the Trump administration expands semiconductor equipment controls, U.S. firms like Lam Research, which derives over 30 percent of its revenue from China, may also face major losses.

Some analysts view the effort as part of former President Donald Trump’s broader strategy to gain leverage over Beijing.

“This decoupling of the global semiconductor supply chain should now be treated as the new normal,” said Kwon Seok-jun, professor of chemical engineering at Sungkyunkwan University. “We need to prepare a strategy that includes an orderly withdrawal.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY SHIM SEO-HYUN [[email protected]]