"Indefinitely extended waiver", South Korean presidential office: The United States agreed to import US semiconductor equipment from Samsung and SK factories in China
According to Yonhap News Agency reported on the 9th, the South Korean presidential office reported on the same day that the US government has agreed to Samsung Electronics and SK Hynix factories in China to import US semiconductor equipment without other licenses, which is equivalent to indefinitely extending the exemptions previously obtained by the two companies.
Choi Sang-mu, chief economic secretary of the South Korean presidential office, said at a press conference on the 9th that the US government recently informed the South Korean side through the economic security dialogue channel of the export control department and the National Security Council, and the United States finally decided to designate Samsung Electronics and SK Hynix semiconductor factories in China as "verified end users" (VEU).
The so-called VEU list is a whitelist mechanism that allows only enterprises that have received prior approval from the US government to export designated items. If listed as a VEU, companies do not need additional approval to apply for a U.S. export ban exemption. Korean media analysis pointed out that this is in fact an indefinite exemption for the export of US chip equipment.
Choi said that as far as he knows, the U.S. government has notified the companies concerned of the decision, which will be "effective immediately." He stressed that this means that the biggest economic and trade problem facing Korean semiconductor companies has come to an end, and the uncertainty related to the operation and investment of Korean semiconductor factories in China has been greatly eased.
Samsung Electronics and SK Hynix welcomed the decision by the US government. SK hynix responded to the observer network on the 9th that the Chinese factory designated by the US government as VEU will make a great contribution to the stability of the global semiconductor supply chain, and the company will honestly abide by the laws and regulations of various countries in the future and make every effort for the development of the global semiconductor industry.
Yonhap News Agency said that Samsung Electronics related people also expressed gratitude to the South Korean and American governments that have been in close communication and consultation with enterprises. Samsung said that the uncertainty of semiconductor production line operation in China has been largely eliminated, and the company will also closely consult with various governments in the future to do its best to ensure the supply chain security of the global semiconductor industry.
South Korea's SK hynix semiconductor factory data map Image source: SK hynix official website
On October 7 last year, the US Department of Commerce upgraded its suppression policy on China's chip industry, comprehensively restricting the export of high-end chips and manufacturing equipment to China, while foreign companies with production bases in China must also be reviewed piece by piece. However, under the strong opposition of Samsung and SK Hineix, the factories of the two Korean companies in China obtained a one-year exemption to import related equipment, which was originally scheduled to expire on the 11th of this month.
At present, Samsung and SK's factories in China are undergoing renovation and upgrading, and need to import a variety of equipment. In order to ensure their normal production activities, the two countries continue to negotiate on the development of separate equipment export standards for Korean companies in China. Yonhap News Agency previously quoted analysis that for the United States, the implementation of the new regulations is inseparable from South Korea's assistance, if Korean companies are adversely affected, it will be difficult for the South Korean government to actively cooperate with the United States. The "Korean National Daily" mentioned that this is also a measure taken to some extent to consider that the domestic semiconductor supply in the United States may not be smooth.
It wasn't a sudden decision. Previously, U.S. officials had already briefed the media and industry about the decision to extend the waiver. The Wall Street Journal reported in June that Alan Estevez, the U.S. undersecretary for industry and security, said at a meeting of the Semiconductor Industry Association, an industry group, that the exemption for South Korean companies would be renewed for the foreseeable future. In September, Bloomberg and Yonhap reported similar news, citing sources.
Some foreign companies are unhappy with Washington's expanded interference in their operations. The Wall Street Journal said semiconductor companies and foreign governments have been closely monitoring the status of these exemptions to understand how U.S. export restrictions will have a strict impact on investment in China after this fall. Industry executives say extending the waiver rather than terminating it amounts to Washington acknowledging that efforts to isolate China from high-tech products are harder than expected in a highly integrated global industry.
As the world's two largest memory chip manufacturers, Samsung and SK Hynix have been deeply engaged in the Chinese market for many years. Samsung Electronics makes NAND flash memory chips in Xi'an, China, SK Hynix makes DRAM memory at its Wuxi plant and NAND chips in Dalian, both of which have invested billions of dollars. According to Trend Force consulting, as of the end of June this year, the two South Korean companies controlled nearly 70% of the global DRAM chip and 50% of the NAND flash memory market.
Samsung Electronics semiconductor production equipment data map Image source: Samsung official website
The Biden administration's suppression and containment of China has already chilled the South Korean industry. Preliminary verification data released by the Korea Customs Service (Customs) on September 21 showed that South Korea's chip exports fell 14.1% year-on-year from September 1 to 20, and as of August, monthly exports fell for 13 consecutive months.
According to data disclosed by the Ministry of Science, Technology and Information and Communications in September, South Korea's information and communication industry (ICT) exports in August this year were US$16.05 billion, down 16.7% year-on-year, and falling year-on-year for 14 consecutive months. Among them, semiconductor exports amounted to 8.64 billion US dollars, due to the delayed recovery of industry demand and the continuous decline in memory chip prices, system chips and memory chips decreased by 14.9% and 26.1% respectively year-on-year. In terms of export regions, exports to China (including Hong Kong), the United States and the European Union decreased by 20.6%, 29.5% and 20% respectively.
"The United States should abandon its current attempt to gain benefits by shaking and breaking global value chains." In an interview with the Financial Times in August, South Korean lawmaker and semiconductor expert Yang Heung-ja criticized the Biden administration's chip strategy, saying that curbing China's ability to acquire or produce advanced chips could damage U.S. relations with Asian allies. She warned that the more the United States "sanctions" China, the more China will strive to achieve rapid technological progress and provide more state support for this, "which will bring a crisis to South Korea given China's abundance of talent and raw materials."
In response to the restrictive measures taken by the United States against China, Chinese Foreign Ministry spokesman Mao Ning previously said that out of the need to maintain scientific and technological hegemony, the United States has abused export control measures to maliciously block and suppress Chinese enterprises, which deviates from the principle of fair competition and violates international economic and trade rules, which not only damages the legitimate rights and interests of Chinese enterprises, but also affects the interests of American enterprises. This approach hinders international scientific and technological exchanges and economic and trade cooperation, and will have an impact on the stability of the global industrial chain and supply chain and the recovery of the world economy. By politicizing, instrumentalizing and weaponizing science and technology, economic and trade issues, the United States cannot stop China's development, but will only block itself and eat itself back.
This article is an exclusive manuscript of the Observer Network and may not be reproduced without authorization.