Korean Semiconductor Industry: "China's Advanced Production Capacity Expansion Limit of 5% Is More Than Enough"

Request to Expand Advanced Semiconductor Production Capacity from 5% to 10% Not Accepted
"In Fact, a 5% Limit Is Sufficient"

Samsung Electronics and SK Hynix must limit their advanced semiconductor production capacity in China (based on annual wafer input) to 5% or less according to the final version of the U.S. Semiconductor Science Act guardrail regulations in order to receive subsidies for establishing and operating factories in the United States. Although the Korean government and industry’s request to increase the practical expansion standard for advanced semiconductors to 10% was not accepted, it is expected that there will be no significant changes to the China production strategy even with the 5% limit.

On the 25th, the semiconductor industry expressed relief that the final version of the U.S. Semiconductor Science Act guardrail regulations announced this time did not deviate significantly from the expected range. As with the previously announced detailed draft regulations, the maintenance and partial expansion of production facilities operated by Korean companies in China were guaranteed, and technology upgrades became possible with consultations with the U.S. Department of Commerce.

An Gi-hyun, Executive Director of the Korea Semiconductor Industry Association, said, "Although it is regrettable that our demand to expand advanced semiconductor production capacity to 10% was limited to 5%, in reality, it is not easy to exceed 5% advanced semiconductor production capacity in China." He added, "Even without U.S. regulations, it is difficult for China to exceed 10% annual wafer input-based advanced semiconductor production capacity, so the semiconductor industry is not greatly unsettled." The final guardrail regulations allow legacy (mature process, general-purpose product) semiconductor production facilities below a certain specification to ▲expand existing facilities up to less than 10%, and ▲if 85% of semiconductors produced by legacy processes are used for final products for the Chinese domestic market, there is no limit on the scale of facility expansion.

Rather, domestic companies are cheering that they can expand advanced semiconductor production capacity in China even by just 5%. A semiconductor industry official explained, "Since Chinese companies are already producing 8th generation NAND products classified as advanced semiconductors, there were concerns that Samsung, the number one semiconductor company, might not be able to produce at its Xi’an factory, but these concerns were alleviated by the confirmation of the final regulations."

He added, "Since it is difficult to expand production of the 8th generation NAND new process by more than 5%, even if the regulation limits production to below 5%, companies will not suffer disadvantages." Another semiconductor industry official said, "The final guardrail regulations are at an expected level, so the entire industry is relieved," and added, "SK Hynix produces both DRAM and NAND in China; DRAM is an advanced semiconductor process, but there is no immediate need to increase production in China, and NAND does not produce advanced products with over 200 layers in China, so the impact of U.S. regulations is minimal."

The Korean government has been conducting close consultations with U.S. government authorities to ensure that Korea’s position is reflected as much as possible during the process of establishing detailed guardrail provisions following the enactment of the Semiconductor Science Act in August last year. As a result, compared to the draft, ▲the production capacity measurement standard (wafer input volume) was changed from monthly to annual to consider seasonal fluctuations in the semiconductor market, and ▲facilities under construction can be recognized as exceptions to guardrail restrictions upon consultation with the Department of Commerce.

Additionally, ▲activities such as ongoing research (requiring Department of Commerce consultation) or efforts to establish international standards were excluded from the scope of technology cooperation restrictions. ▲The investment amount limit for expansions exceeding 5% (previously set at $100,000) was changed to be determined through agreements with companies, which is also seen as an improvement. The Ministry of Trade, Industry and Energy evaluated this by stating, "It is expected to reflect the general business environment of the industry and guarantee normal business activities without national security concerns."

The semiconductor industry is placing weight on the possibility that the exemption for semiconductor equipment export controls to China, which has not yet been finalized, may be extended for another year, as the U.S. government reflected Korean companies’ positions considerably during the process of finalizing the Semiconductor Science Act guardrail regulations. The U.S. controlled semiconductor equipment exports to production facilities in China in October last year but granted Samsung Electronics and SK Hynix a one-year exemption period. Ahead of the expiration of the semiconductor equipment export control exemption next month, the Korean government is conducting final negotiations with U.S. authorities to secure additional extensions and designate specific equipment that can be imported.

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