US to make it harder for SK hynix, Samsung to make chips in China

SK hynix headquarters in Icheon, Gyeonggi Province, July 24 / Yonhap

The U.S. Commerce Department announced a plan Friday to strip South Korean tech firms Samsung Electronics Co. and SK hynix Inc. of "validated end-user (VEU)" status, a move that will require them to secure licenses for sending certain U.S. chipmaking equipment to their plants in China.

On the Federal Register, the department's Bureau of Industry and Security said it will revise the existing VEU authorizations list for China by removing the companies as well as Intel Semiconductor Ltd. The department stressed its intention not to grant licenses to expand their capacity or upgrade technology at plants in China.

During the previous Biden administration, Samsung Electronics and SK hynix were designated as VEUs, a status that reduces the licensing burden on the companies by allowing them to ship certain U.S. semiconductor equipment to pre-approved sites under a general authorization instead of individual export licenses.

The decision will take effect 120 days after the official date of its publication on Sept. 2.

In a press release, the Commerce Department said that the plan to revoke the VEU status aims to close a "Biden-era loophole."

"The Trump Administration is committed to closing export control loopholes -- particularly those that put U.S. companies at a competitive disadvantage," Under Secretary of Commerce for Industry and Security Jeffrey Kessler was quoted as saying in the release.

"Today's decision is an important step towards fulfilling this commitment."

The U.S. has been tightening its rules on exports of advanced technologies to China amid an intensifying rivalry between the two superpowers over technological leadership, maritime security and other fronts.

In response, the South Korean government said it will work to minimize the impact on domestic chipmakers.

The Ministry of Trade, Industry and Energy said in a statement that Seoul had been briefed in advance by the U.S. government on its decision to end the VEU status for Samsung and SK hynix.

"The government has been closely communicating with the U.S. Department of Commerce on possible adjustments to the VEU system, stressing the importance of smooth operations of our chipmakers' Chinese facilities for global semiconductor supply chain stability," the ministry said. "Even if VEU status is withdrawn, we will continue to work with the U.S. to ensure any impact on Korean companies is minimized."