Hynix Caught in US-China Conflict Fallout... Government Embarrassed by 'Second MagnaChip' Incident

Ministry of Industry Must Decide on Approval if Hynix Applies to Export Semiconductor Equipment to China
"Currently, Hynix Finds It Difficult to Apply, and Government Cannot Approve"... Government Needs to Consult with the US

[Image source=Reuters Yonhap News]

[Sejong=Asia Economy Reporter Kwon Haeyoung] The planned introduction of advanced semiconductor equipment at SK Hynix's Wuxi plant in China, expected as early as next year, is at risk of being canceled due to the United States' restrictions against China, putting not only Hynix but also the South Korean government in a difficult position. This issue is much more challenging to resolve than the stalled sale of MagnaChip to Chinese investors amid US-China tensions, making it difficult for the government to find a sharp solution. As the US intensifies its sanctions against China, with Korean companies becoming scapegoats, calls for the government to take a more active role are growing louder.

According to the government on the 22nd, if Hynix intends to export the extreme ultraviolet (EUV) lithography equipment from the Dutch company ASML, which was introduced domestically, to China in the future, it must obtain approval from the Ministry of Trade, Industry and Energy.

The 'Wassenaar Arrangement,' an international organization for strategic goods export control, designates EUV equipment as a controlled export item. EUV equipment is essential for semiconductor fine processing and is exclusively produced by the Netherlands. To export this equipment, permission must be obtained from the country where the equipment is located. If the equipment introduced domestically is exported, the South Korean government’s approval is required; if exported directly from the Netherlands to China, approval from the Dutch government is necessary. Accordingly, if Hynix wishes to export the EUV equipment located in South Korea, the Ministry of Trade, Industry and Energy must decide on the strategic goods export permit within 15 days under the Foreign Trade Act.

Earlier, Hynix signed a five-year contract with ASML on February 4 to purchase EUV equipment, investing 4.75 trillion won. Considering that the EUV process was recently applied to the DRAM production line at the Icheon plant, it is estimated that the Wuxi plant, which has a 1-3 year technology gap, planned to introduce EUV equipment as early as next year or in 2023.

Inside and outside the government, it is expected that Hynix will find it difficult to apply for permission to export the domestically introduced EUV equipment to China. Although Korean companies such as Samsung Electronics and Hynix produce semiconductors, the equipment market necessary for semiconductor production is dominated by American and European companies. There is concern that pushing forward with advanced modernization of the Wuxi plant despite US opposition could provoke even greater retaliation from the US.

Even if Hynix applies for permission to export the EUV equipment to China, the government’s likelihood of granting approval is very low. Previously, MagnaChip also attempted to sell to Chinese investors, but the US, which is in conflict with China, blocked the deal, and the South Korean government has not approved the sale citing concerns over technology leakage.

An industry official said, "Since EUV equipment is designated as a controlled export item, the government must decide on export approval considering concerns about technology leakage and international trends. In the current US-China conflict situation, even if Hynix applies, approval will not be easy," adding, "Hynix itself is aware that the act of applying for export sends a signal and could cause greater damage in the future, so it is unlikely to push for export to China amid US opposition."

As Korean companies become victims of the US-China tech competition, calls for the government’s active role are increasing. Another industry official said, "We need to find alternatives such as exclusive use of Hynix’s EUV equipment followed by disposal or returning it to the Netherlands after use, and persuade the US," adding, "This is a problem difficult for companies to solve independently, so the government must step in and negotiate with the US on this issue."

This content was produced with the assistance of AI translation services.