South Korean tech companies will be allowed to ship American chip-making tools to their factories in China without requesting permission from US authorities, an export ban concession that aims to keep Seoul in line with Washington’s wider tech war on China.
South Korea’s presidential office said Monday (October 9) that the US Commerce Department is updating its “validated end user” list to allow chipmakers Samsung and SK Hynix to supply certain US chip-making tools to their China-based production facilities for an indefinite term.
The list denotes specifically which entities can receive exports of which technology. Companies on the list do not need to obtain licenses to ship the US tech items to China.
“Uncertainties about South Korean semiconductor firms’ operations and investments in China have been greatly eased,” said Choi Sang-mok, South Korea’s senior presidential secretary for economic affairs, in response to the US announcement.
Chinese commentators, on the other hand, were less than enthused by the highly calibrated US decision.
“The latest decision of the US should not be seen as a relaxation of the country’s chip export controls against China,” an unnamed chip industry investor told the Economic Observer in China on Tuesday. “It’s too early to say that the US will lift its chip curbs for Chinese chipmakers.”
He noted South Korean chipmakers operate individually in mainland China and thus do not have a lot of collaboration or connection with local Chinese suppliers. He said the only good news related to the US announcement is that it will strengthen economic cooperation between China and South Korea and help ease geopolitical tensions in the region.
A Chinese chip expert said the US announcement aims to minimize the negative impact of its curbs against China on the two South Korean firms, which have strong bargaining power due to their dominance in the memory chip sector.
Samsung and SK Hynix held a combined 50% share in the global NAND flash market and a 70% share in the global DRAM market as of the end of June this year, according to Trendforce, a market intelligence provider.
Currently, Samsung produces 40% of its NAND chips at its plant in Xi’an in China while SK Hynix makes 40% of its DRAM chips in Wuxi and 20% of its NAND chips in Dalian.
DRAM chips lose their stored data when the power is removed and are usually used in gadgets to make downloading smoother. NAND chips can store data without power and are mainly used in USB memory sticks and hard drives.
A Hubei-based writer surnamed Wu claims in an article that the US wants South Korean firms to overwhelm their Chinese rivals by dumping their memory chips into China’s markets.
“The US banned all China-based chipmakers, except South Korean ones, to obtain its chip-making equipment. Why did it do so?” Wu says. “We must be alerted that the US may want to use South Korean firms to suppress China’s semiconductor industry.”
He says the US realized that its curbs had failed to stop China from grooming its own chipmakers over the past few years so it wants to support South Korean firms to eliminate Chinese competitors. He claims the US used the same method to suppress Japan’s chip sector back in the 1980s.
He also says that China should encourage its state-owned enterprises to procure Chinese chips in order to provide local chipmakers and their suppliers enough profits to survive and grow their businesses.
On October 7 last year, the US Commerce Department’s Bureau of Industry and Security (BIS) imposed a series of new curbs on China’s chip sector. At the time, it said any China-based chip foundry that produces DRAM chips of 18 nanometers or less or NAND flash memory chips with 128 layers or more needs to apply for a license to obtain US chip-making tools.
It said facilities owned by Chinese entities will face a presumption of denial while those owned by multinationals will be decided on a case-by-case basis.
Due to opposition from Samsung and SK Hynix, the US government later issued a one-year waiver for them to continue to ship US items to China. In late August, media reports said the US would extend the waiver, which was due to expire on October 11. The two Korean firms now have an indefinite waiver on the ban.
Samsung said Tuesday that the US decision will significantly remove uncertainties surrounding the operation of its chip factories in China. SK Hynix, meanwhile, said the decision will help to stabilize global semiconductor supplies.
Yangtze Memory Technologies Corp (YMTC) and ChangXin Memory Technologies (CXMT) are the two major memory chip makers in China. YMTC is said to be capable of making 232-layer NAND chips (the greater the number of layers, the bigger a NAND memory chip’s storage.) CXMT can currently make 19nm DRAM chips.
By comparison, Samsung has started to mass-produce 236-layer NAND chips and will make 300-layer NAND chips in 2024. SK Hynix is making 10nm DRAM chips and 238-layer NAND chips with plans to produce 321-layer NAND chips in the first half of 2025.
Some Chinese commentators suggested that Samsung and SK Hynix can now boost their China-based production and potentially start a price war to gain market share in China. They said many Chinese electronic product makers may seek to use South Korean chips, which are generally of a higher quality than Chinese-made ones.
On August 29, Huawei Technologies launched its flagship smartphone Mate60 Pro, which used its self-developed Kirin 9000s processor.
TechInsights, a Canadian research firm, said the Kirn 9000s is a 7nm chip produced by China’s Semiconductor Manufacturing International Corp (SMIC), China’s top chipmaker. It also said it found two SK Hynix chips – a DRAM and a NAND chip – inside the Mate60 Pro.
Public information showed that SK Hynix’s DRAM and NAND chips could be 50% and 100% faster than those made by CXMT and YMTC, respectively.
Read: US extends China chip curb waiver for allies’ fabs
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