Samsung Electronics and SK Hynix, two leading South Korean semiconductor manufacturers, are closely monitoring the evolving US regulations on exporting chipmaking equipment to their Chinese facilities. The Trump administration’s recent decision to close the Biden-era Validated End-User (VEU) program, which granted indefinite clearance for the export of equipment, has injected significant uncertainty into its operations. Effective December 31st, the companies will require export licenses for all equipment shipments. This move, announced by the Bureau of Industry and Security (BIS), removes Samsung China Semiconductor and SK Hynix Semiconductor China from the VEU authorization list.
The VEU program, established under the Biden administration, permitted the export of most semiconductor equipment, excluding cutting-edge technologies, to their Chinese plants. These plants represent a substantial portion of their global production; TrendForce estimates that approximately 35% of Samsung’s NAND flash memory output and 40% of SK Hynix’s DRAM output will originate from China by 2025. The loss of VEU status necessitates that US equipment suppliers, such as Lam Research and Applied Materials, obtain licenses for every equipment investment decision made by Samsung and SK Hynix in China.
While the new rules do not apply to existing equipment and the companies currently do not manufacture cutting-edge technology in China, the implications are still significant. The BIS stated that it intends to grant licenses for maintaining existing facilities, but not for expansion or technological upgrades. This poses a considerable challenge for long-term planning and investment. Industry analysts, such as Samsung Securities’ Lee Jong-wook, predict potential delays of two to three months in investment execution, which could lead to higher product prices.
The proposed “site license” approach, reported by Bloomberg, may offer a compromise. This system would require annual approval for specific equipment quantities, aiming to balance tighter controls on technology transfer to China with the need to maintain global semiconductor supply chain stability. However, this introduces a layer of complexity and unpredictability, particularly concerning unforeseen equipment needs such as repairs. The ongoing situation highlights the delicate balance between national security concerns and the global economic impact of semiconductor production.
