U.S. Tightens Rules for Samsung and SK Hynix Chip Production in China

According to the Federal Register, the United States is making it more difficult for chipmakers Samsung (005930.KS) and SK Hynix (000660.KS) to manufacture semiconductors in China by revoking the authorizations that had allowed them to receive U.S. semiconductor equipment there.

The Commerce Department had granted these companies exemptions from sweeping restrictions imposed in 2022 on sales of U.S. chipmaking equipment to China. With the revocation, they will now be required to obtain licenses to purchase such equipment for their operations in China.

Intel (INTC.O) was also included in the federal filing, losing its authorization despite having sold its Dalian, China facility earlier this year. These cancellations will take effect in 120 days.

The Commerce Department stated that it plans to approve licenses enabling the companies to maintain operations at their existing facilities in China. However, it does not intend to approve applications for capacity expansions or advanced technology upgrades.

In a statement, SK Hynix said it would remain in close contact with both the Korean and U.S. governments and take necessary measures to minimize the impact on its business. Samsung declined to comment.

South Korea’s Ministry of Industry said it had emphasized to the Commerce Department the importance of ensuring stable operations for Korean semiconductor companies in China to safeguard the global supply chain. Seoul added that it would continue talks with Washington to limit the fallout for Korean firms.

China’s Ministry of Commerce condemned the move, saying Beijing “opposes the U.S. action” and will take “necessary steps to firmly protect the legitimate rights and interests of enterprises.”

The licensing changes are expected to hit U.S. equipment makers such as KLA Corp (KLAC.O), Lam Research (LRCX.O), and Applied Materials (AMAT.O), which may see reduced sales to China. None of the three companies immediately responded to requests for comment. Shares of Lam fell 4.4%, Applied Materials dropped 2.9%, and KLA declined 2.8%.

Potential Boost for Chinese Firms and Micron

When the revocation was first flagged in June, a White House official said the U.S. was “simply laying the groundwork” amid strains in trade talks with China.

Although Washington and Seoul reached a partial agreement on tariffs in July, South Korean President Lee Jae-myung left a summit with U.S. President Donald Trump this week without finalizing the deal in writing. For now, a tariff truce remains in place: Chinese imports face a 30% duty in the U.S., while Chinese tariffs on U.S. goods stand at 10%, both set to remain until November.

The trade war between the world’s two largest economies has disrupted everything from rare earth minerals vital to U.S. industry to China’s purchases of American soybeans.

Chris Miller, author of Chip War, said the decision would make it increasingly difficult for Korean chipmakers with operations in China to keep producing advanced semiconductors. The move could also benefit Chinese equipment suppliers and Micron Technology (MU.O), Samsung and SK Hynix’s chief U.S. rival in the memory chip sector.

Miller warned, however, that if additional measures are not taken against Chinese chipmakers such as YMTC and CXMT, the changes risk giving Chinese firms a competitive edge at the expense of their Korean counterparts.

Meanwhile, thousands of U.S. export license applications to ship goods and technology to China remain stuck in limbo, Reuters reported earlier this month, including applications worth billions of dollars in semiconductor manufacturing equipment.

Currently, foreign chipmakers like Samsung and SK Hynix enjoy “validated end user” (VEU) status, which allows U.S. suppliers to deliver goods “more easily, quickly, and reliably” than if an export license were required. That designation, however, will now be withdrawn.