SEOUL – Washington will exempt top-tier South Korean chipmaker SK hynix from certain US export controls imposed last week on sending high-technology equipment to China, according to a company disclosure revealed today (October 12).
The one-year exemption will come as a huge relief for SK hynix, the number-two memory player in both South Korea and the world, which today announced the decision in a disclosure headlined, “SK hynix to Maintain Current Production at Global Fabs.”
US export controls on chip-making capital goods that require special permits would have been a significant impediment to SK hynix’s business and operations. Related rumors, leaks and unsourced reports of the possible US restrictions had been circulating for weeks.
Today’s announcement appears to negate news that broke on October 11 when US semiconductor equipment manufacturer KLA said it would no longer be able to supply SK hynix with certain of its products.
It seems likely that cross-town rival Samsung Electronics, the world’s number-one maker of memory chips, will benefit from a similar exemption, though there has been formal corporate announcement yet.
Since former president Donald Trump launched his tech war on China, the US has used semiconductors as a pressure point on Beijing. The components, some with dual-use military applications, are hugely important in a fast-digitizing world economy.
Chip manufacturing is largely done in East Asia, including China, but cutting-edge chips are produced mostly by South Korean and Taiwanese manufacturers, both US allies.
The US holds important intellectual property and competitiveness advantages in related chip design suites and capital goods, offering it big leverage over the industry despite its deficiencies in actual chip production. Washington is also, under the newly passed and richly funded CHIPS Act, seeking to bring chipmaking back to US shores.
SK hynix’s exemption may be the result of diplomacy conducted by Korean executives and officials who have been working furiously behind the scenes to win favorable US treatment for their companies.
It is not just chipmakers who are feeling the brunt of US restrictions. In a separate issue, Korean automakers say they are disadvantaged by the US Inflation Reduction Act, as they are not eligible for government subsidies their local competitors receive on electric vehicles (EVs) made for American roads.
A statement sent by SK hynix to journalists today read, “Our discussions with the Department of Commerce led to an approval to supply equipment and items needed for development and production of DRAM semiconductors in Chinese facilities without additional licensing requirements.”
The new US rules, announced on October 7, require a license for export, re-export or transfer (in-country) to China items including manufacturing equipment and support for DRAM chips that are of 18-nm and below, NAND chips with 128 layers or more and logic chips of 14-nm and below.
“SK hynix was able to secure an authorization to continue its operations without additional licensing requirements imposed by the new rules,” the company statement read.
The timing of SK’s release looks relevant.
Just a day before, KLA, a US company that supplies the same semiconductor manufacturing equipment detailed in SK hynix’s release, had announced that it would cease supplying products to firms doing business in China, including SK hynix.
SK hynix’s stock price dipped below 89,000 won on the October 11 news, but today recovered to 94,000 won on the exemption announcement.
A SK hynix official who spoke to Asia Times said it was his understanding that KLA would be able to continue to supply the company with the necessary equipment due to the granted exemptions.
“We think KLA was being conservative with its announcement,” the spokesperson said.
Even so, US export controls on highly advanced EUV equipment made by Dutch firm AMSL, which SK hynix had sought to export to China last November, remain in place, the spokesperson told Asia Times.
It would appear that today’s news means that SK hynix can continue operations at its China plants but will be unable to upgrade those facilities with the most advanced equipment. Crucially, the US exemption is for only one year, according to today’s announcement.
“It is very difficult to answer,” said one Seoul tech watcher when asked by Asia Times what difference the exemption for KLA gear and the non-exemption for AMSL chipmaking equipment would have on SK hynix’s fabrication operations in China.
As Washington ramps up its chip war on Beijing – Seoul’s leading trade partner and a key location for its offshore investments – there has been widespread fear that Korean firms will suffer collateral damage.
In an apparent countermove, some very high-profile public diplomacy has been conducted in recent months by the heads of South Korea’s chip giants – diplomacy that has reached to the summit of American power.
SK Group’s chairman Chey Tae-won, in an unusual July 27 video conference, spoke to US President Joe Biden about his corporation’s plan to invest an additional US$22 billion in the US: $15 billion in chips, $5 billion in green energy and the remainder in bioscience and biopharmaceuticals. All that is on top of prior investment commitments worth $10 billion in EV batteries.
SK Group, a widely diversified conglomerate that is the parent group of SK hynix, boasts global strengths in chips, energy and batteries.
Biden, in his discussion with Chey, noted that SK’s investments in the US will create 16,000 jobs and – in an apparent dig at the Trump administration – added, “Today’s announcement is also proof that America’s back to working with our allies.”
US Secretary of Commerce Gina Raimondo sat in on the video call. Months earlier, Biden, disembarking in Korea on May 20 to meet then-newly inaugurated President Yoon Suk-yeol, made Samsung’s Pyeongtaek semiconductor fab his first stop.
“This is an auspicious start for my visit because it’s emblematic of the future of cooperation and innovation that our nations can and must build together,” Biden, who also met Samsung Electronics heir and de facto chief Lee Jae-yong during the tour of the plant, said at the time, according to the White House.
A Samsung spokesperson said that, for now, the company was declining to comment on whether it had won the same exemptions as SK hynix. However, Yonhap News Agency, citing unnamed sources, reported, “Samsung is also said to have been given the same temporary exemptions.”
It is not just Korean tycoons who are making their case about the disadvantages they are suffering from US policies; Seoul officialdom, too, has been going to bat.
President Yoon briefly collared Biden at a charity event on the sidelines of the recent UN General Assembly in New York in order – according to Yoon’s office – to bend the US president’s ear on IRA-related issues.
That point was lost in the hubbub after Yoon made some foul-mouthed comments about legislators that were picked up on a hot mic, generating red faces among his handlers and critical news headlines about the new president’s knack for gaffes.
However, National Security Advisor Kim Sung-han revealed today to foreign reporters that Biden had “expressed understanding” about Korean concerns over the IRA in a personal letter sent to Yoon.
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