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US allows Samsung and SK Hynix to expand their chip plants in China in key concession to South Korea


The Biden administration will allow Samsung Electronics and SK Hynix to acquire the equipment they need to sustain and expand their giant chip-making operations in China, a victory for the world’s two biggest memory makers.

Washington has effectively granted the pair an indefinite waiver on broader restrictions banning the shipment of advanced chipmaking gear to China, South Korea’s presidential office said in a statement on Monday.

The US concession means Hynix and Samsung are free to import advanced American machinery that would otherwise be prohibited from entering China, but are crucial in allowing the Korean industry leaders to operate in the world’s biggest chip arena over the longer term.

“The US government’s decision means that the biggest trade issue for Korean semiconductor companies has been resolved,” presidential economic adviser Choi Sang-mok told reporters during a briefing. “Korean chip companies are key suppliers and equipment consumers, accounting for 60.5 per cent of the world’s memory output, and their stable production is directly linked to the stability of the global semiconductor supply chain.”

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Hynix warned in 2022, when Washington unveiled its broadest series of chip export restrictions, that escalating curbs could force the closure or sale of a major plant in China in a worst-case scenario.

It operates a DRAM factory in Wuxi in central China, which produces a major proportion of its global memory chips, and also runs NAND facilities in the northern city of Dalian. Memory chips made in China can be integrated into a range of products assembled in the country, including for US companies like Apple.

“Through close coordination with relevant governments, uncertainties related to the operation of our semiconductor manufacturing lines in China have been significantly removed,” a Samsung Electronics spokesperson said. “We will continue to work closely with all relevant governments to maintain a stable supply chain for the global semiconductor industry.”

The sweeping 2022 regulations struck at the heart of Beijing’s tech ambitions but also cast uncertainty around foreign operators in China, including Hynix and its larger rival Samsung.

Both secured a one-year waiver at the time that let them import necessary equipment, but have since grappled with uncertainty over whether that waiver will get extended. Hynix warned around that time that it will cut capital spending by half in 2023 to reflect waning electronics demand.

Washington has decided to scrap that restriction for Hynix and Samsung with immediate effect, local news agency Yonhap first reported on Monday.

“We welcome the US government’s decision to extend a waiver with regard to the export control regulations,” a SK Hynix spokeswoman said in a text message to Bloomberg.

The Biden administration in late September also removed a stringent curb on expansion in China by semiconductor companies that get federal funds to build plants in the US. It eliminated a US$100,000 spending cap on investments in advanced capacity in China, which would effectively prevent companies getting federal funding from growing output of chips more advanced than 28-nanometre.

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