The US government has agreed to waive export controls that would have prevented Samsung and SK Hynix from supplying equipment to their Chinese factories. The decision, which was announced by the South Korean presidential office on Tuesday, is a major victory for the two South Korean chipmakers, which have invested billions of dollars in China.
US Export Controls Aimed to Curb China’s Chip Ambitions
The US government imposed the export controls in October 2022 in an effort to prevent China from gaining access to advanced semiconductor technology. However, the controls were met with strong opposition from the South Korean government and businesses, which argued that they would harm the global semiconductor supply chain and damage relations between the US and its allies.
Under the export controls, Samsung and SK Hynix would have had to apply for additional licenses from the US government to import equipment for their Chinese factories. The equipment includes lithography machines, etching tools, and deposition systems, which are essential for making memory chips.
The export controls were part of the US strategy to contain China’s rise as a semiconductor power. The US has also imposed sanctions on Huawei, SMIC, and other Chinese companies, restricting their access to American technology and suppliers. The US fears that China could use its chip capabilities for military and strategic purposes, as well as challenge the US dominance in the global tech industry.
Samsung and SK Hynix Welcome the US Decision
Under the new agreement, Samsung and SK Hynix will be able to import equipment for their Chinese factories without having to apply for additional licenses from the US government. The agreement is effective immediately.
“We are grateful to the US government for its decision, which will allow us to continue to invest in our Chinese factories and meet the growing demand for semiconductors in the Chinese market,” said a Samsung spokesperson.
SK Hynix also welcomed the decision, saying it “will help us to strengthen our competitiveness in the Chinese market and contribute to the local economy.”
The decision is a major step forward for Samsung and SK Hynix, which have been seeking to expand their presence in China. The two companies are major suppliers of memory chips, which are used in a wide range of electronic devices, including smartphones, computers, and servers.
Samsung has two memory chip plants in Xi’an, China, which produce NAND flash chips. The company plans to invest $8 billion to build a third plant in Xi’an by 2024. SK Hynix has one memory chip plant in Wuxi, China, which produces DRAM chips. The company plans to invest $10 billion to build a second plant in Wuxi by 2025.
The Impact of the US Decision on the Chip Industry
The US decision to waive export controls for Samsung and SK Hynix is expected to have a significant impact on the global chip industry, which is facing a severe shortage of supply amid surging demand.
The chip shortage has affected various sectors, such as automotive, consumer electronics, and cloud computing. Many companies have reported delays in production and delivery due to the lack of chips. Some analysts estimate that the chip shortage could last until 2024 or beyond.
By allowing Samsung and SK Hynix to supply equipment to their Chinese factories, the US is helping to ease the chip shortage by increasing the production capacity of memory chips. Memory chips account for about 30% of the global semiconductor market.
However, the US decision could also have some negative consequences for the US and its allies. By enabling Samsung and SK Hynix to expand their operations in China, the US is potentially giving China more access to advanced semiconductor technology and know-how. China could use this opportunity to improve its own chip industry and reduce its dependence on foreign suppliers.
Moreover, by relaxing export controls for Samsung and SK Hynix, the US is weakening its leverage over China in trade negotiations. The US could lose some of its bargaining power over issues such as intellectual property rights, market access, and human rights.
