US Aiming to Cut Off China's Semiconductor Industry...Domestic Equipment Sector Also 'Watching Closely'

Significant Share of Chinese Business in Korean Semiconductor Equipment Industry
No Direct Impact from U.S. Semiconductor Sanctions on China
"Assessing Future Impact"... Indirect Impact Considered Negative Factor

Source=Pixabay

[Asia Economy Reporter Kim Pyeonghwa] As the United States continues to escalate semiconductor sanctions against China, the domestic semiconductor equipment industry is closely monitoring these developments. Although no visible regulations have been implemented at this point, the complexity of the U.S. legislation means that potential additional impacts are being examined. If the U.S. sanctions cause the Chinese semiconductor industry to shrink, indirect effects could be felt depending on the proportion of local business.

According to the semiconductor equipment industry on the 21st, major domestic semiconductor equipment manufacturers such as Wonik IPS, Jusung Engineering, and Eugene Technology have a significant business presence in China. As of the first half of this year, Wonik IPS recorded 34% (138.5 billion KRW) of its total sales (408.5 billion KRW) overseas, with China being one of the main export countries alongside the U.S. and Taiwan. Jusung Engineering generated about 52% (195.7 billion KRW) of its total sales (377.3 billion KRW) in China last year. The industry is paying close attention to the potential impacts arising from U.S. sanctions, given the significant share of their business in China.

Earlier, on the 7th (local time), the U.S. Department of Commerce announced measures banning the export of semiconductor equipment to Chinese companies producing DRAM below 18 nanometers (nm, one billionth of a meter), NAND flash with 128 layers or more, and logic semiconductors below 14 nm. While previous regulations had already restricted exports of AI graphics processing units (GPUs) to China, this time the sanctions have been expanded comprehensively to increase pressure on China. As the U.S. and China continue their semiconductor industry hegemony competition, there are claims that further sanctions could be possible.

The domestic semiconductor equipment industry states that there are no direct U.S. sanctions affecting companies like Samsung Electronics or SK Hynix. This is because the U.S. semiconductor equipment export restrictions to China primarily target U.S. semiconductor equipment companies. There are also no provisions, such as the Foreign Direct Product Rule (FDPR), that could indirectly affect domestic equipment manufacturers through circumvention routes. The FDPR prohibits the import of products produced outside the U.S. if they use U.S. technology into certain countries.

However, due to the complexity of U.S. legislation, the industry is carefully monitoring how detailed impacts will unfold. The government is also investigating the effects of U.S. sanctions on the domestic semiconductor industry. A representative from the domestic semiconductor equipment industry explained, "Since the U.S. sanctions were announced recently, we are currently assessing the situation," adding, "If there is an impact from the sanctions, there will be areas where we can take independent measures and others where we can collaborate with the government to find solutions."

Indirect impacts that may arise if the U.S. sanctions cause the Chinese semiconductor industry to contract are important to consider. In such cases, experts advise that the government should prepare countermeasures. Professor Eom Jaecheol of the Semiconductor Electronics Department at Youngjin College said, "As domestic semiconductor equipment companies grow, China is the easiest market to supply," adding, "If problems arise in China, where the export share is large, difficulties may occur."

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