US proposes annual chip export licenses for Samsung, SK Hynix
What's the story
The US is considering a proposal to grant annual approvals for the export of chipmaking supplies to Samsung Electronics and SK Hynix's factories in China, according to Bloomberg. The move comes as a compromise to avoid disruptions in the global electronics industry. This follows the revocation of waivers by Trump officials that had made it easier for these companies to receive such shipments.
Approval transition
Proposal to replace previous indefinite authorizations
The US Commerce Department officials recently proposed a "site license" to their Korean counterparts. This would replace the indefinite authorizations that Samsung and SK Hynix had received under the Biden administration. The proposal comes as the validated end user (VEU) designations are set to expire at the end of this year.
System impact
VEU system allowed unlimited approval
The VEU system had allowed Samsung and SK Hynix to get indefinite approval for shipping estimated quantities of supplies to their factories in China. This was based on up-front security and monitoring commitments. However, the Trump administration's proposal now requires these South Korean giants to seek US approval for a year's worth of restricted gear, parts, and materials at a time.
Process complexity
New process adds complexity but offers a way forward
The new approval process, while adding complexity, also provides a way for South Korea's top chipmakers to continue operating their large factories in China. These facilities produce components for everything from smartphones to data centers. US officials have said they don't want to disrupt operations at these plants, but they won't approve shipments of gear that could be used for upgrades or expansions either.
Mixed reactions
South Korean officials feel both relieved and frustrated
The US's draft proposal has left South Korean industry and government officials feeling both relieved and frustrated. They are relieved that a path forward exists, but also frustrated by the extra burden it imposes. The overall situation has once again put South Korea in a tough spot between its most important ally and its biggest trading partner.
Control measures
Washington imposed chip shipment controls to China in 2022
In 2022, Washington imposed sweeping controls on chip shipments to China to curb the Asian country's semiconductor and AI capabilities. Former President Joe Biden's team had issued waivers to Samsung, SK Hynix, and Taiwan Semiconductor Manufacturing Co. These waivers were aimed at softening the impact of those curbs on companies from friendly countries that had long operated in an adversary nation.