US Semiconductor Equipment Supply from China Halted... Korean Industry Faces Fallout

Started Individual Permit Procedure Work in Cooperation with the Government

[Asia Economy Reporters Sunmi Park, Pyeonghwa Kim] Korean semiconductor companies such as Samsung Electronics and SK Hynix, which have NAND flash and DRAM production plants in China, are facing the risk of suspension of supply of American-made equipment. This follows the U.S. Department of Commerce's official announcement of export control measures banning the sale of American semiconductor equipment to semiconductor manufacturers in China, with subsequent notifications to customers about halting equipment deliveries. Korean companies directly affected plan to focus on obtaining export approvals through individual reviews, but the possibility of production disruptions cannot be ruled out.

According to the semiconductor industry on the 12th, American semiconductor equipment companies including KLA recently notified several semiconductor companies with factories in China about the suspension of product and service deliveries. The notice included halting equipment deliveries from the 7th and stopping product-related technical services from the 12th. The affected equipment and related technologies include those for DRAM below 18nm (nanometer, one billionth of a meter), NAND flash with 128 or more layers, and advanced logic chips.

The industry understands this notification as a follow-up to the U.S. Department of Commerce's announcement on the 7th of this month, which effectively bans the sale of advanced American semiconductor equipment to semiconductor manufacturers in China and restricts exports of semiconductors used in artificial intelligence (AI) and supercomputers. By blocking not only equipment exports but also related technical services, the U.S. is moving to immediately implement plans to curb China's semiconductor ambitions.

SK Hynix and Samsung Electronics, operating DRAM plants in Wuxi and NAND flash plants in Xi'an, respectively, stated that they do not currently plan large-scale expansions, so the impact is not significant. However, given the industry's nature where equipment must be supplied as needed, the general view is that the longer it takes to find alternatives, the more inevitable production disruptions become.

Korean semiconductor companies find it difficult to respond individually since the measures come from the U.S. Department of Commerce. Accordingly, they are exploring plans to cooperate with the Korean government to initiate individual licensing procedures to continue receiving equipment supplies from the U.S. The Ministry of Trade, Industry and Energy stated, "Since the U.S. Department of Commerce has expressed its intention to operate licensing procedures to ensure uninterrupted equipment supply through case-by-case reviews for equipment supplied to Korean companies' factories in China, Korean companies producing semiconductors in China will make every effort to prepare for obtaining the necessary licenses for equipment supply."

Experts note that although the U.S. has left open the possibility of approval through individual reviews for overseas companies, immediate equipment imports have become impossible, so the speed of equipment approval will determine whether production disruptions occur.

Professor Lee Hyuk-jae of the Department of Electrical and Computer Engineering at Seoul National University advised, "The government should negotiate well with the U.S. to ensure that equipment reaches domestic companies' factories in China on time during the individual review process. Since U.S. semiconductor regulations on China will continue, companies should also prepare long-term measures such as expanding production lines in other regions."

Lee Chang-han, Vice Chairman of the Korea Semiconductor Industry Association, diagnosed, "Samsung Electronics and SK Hynix have factories in China, and while current production might continue, it will be difficult to continuously upgrade and invest in equipment. Companies inevitably have to consider how to handle their business in China."

Some argue that even with individual licensing procedures, the ongoing U.S. stance of containing China means these measures may have limited significance. Yeon Won-ho, head of the Economic Security Team at the Korea Institute for International Economic Policy, explained, "Since there is a presidential election in 2024, similar (sanction) measures influenced by public opinion may emerge again in the second half of next year. The mere fact of having factories in China is a (U.S.) signal that it is problematic."

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