The U.S. grants a one-year extension in implementing semiconductor equipment export control for Korean chipmakers.

Production facilities in China operated by Samsung and SK are to benefit.

The U.S. is to allow a comprehensive approval covering the import of equipment required to upgrade facilities in China.

This is a shift from the original stance of implementing reviews on a case-by-case basis - a move supposedly made to prevent Korean companies from being hit by the export control

In comparison to a recent move made by the U.S. government to effectively prohibit U.S. companies from exporting semiconductor equipment to China, an exemption released by the U.S. government is earning attention. This measure will grant factories operated by Samsung Electronics and SK Hynix in China a one-year grace period to import equipment from the U.S. - exempting these companies from obtaining licensing requirements by the U.S. government.

According to multiple sources in Korea and the U.S., the U.S. Department of Commerce officially notified Samsung Electronics and SK Hynix of this decision on October 11^th local time. Earlier on October 7^th, the Department of Commerce announced a set of fresh measures that effectively restrict U.S. companies from exporting semiconductor manufacturing equipment to Chinese semiconductor-producing companies, in an attempt to hamper China gaining access to technologies relevant to semiconductors. The sweeping export curbs, among other things, demand U.S. companies to obtain a license for equipment and technology exports to Chinese firms that produce chips requiring advanced technologies, including the following list of chips: a) DRAM chips that are 18 nanometers and below (One nanometer is equal to one billionth of a meter), b) NAND flash chips with 128 layers or more, and c) logic chips between 14 and 16 nanometers and below that incorporate the use of FinFET technology.

A blanket export ban will be imposed by applying the principle of “presumption of denial” to effectively restrict exports to production facilities in China that are owned by Chinese companies.” Leniency is to be granted to a certain extent for production facilities in China that are owned by foreign companies. Export requests placed by such facilities will be reviewed on a case-by-case basis by Washington to get authorized for business transactions in China. The measure for Samsung Electronics and SK Hynix that was announced on October 11^th is a move that goes a step further from the principle of a case-by-case review. The exemption granted to these two Korean chipmakers allows their production facilities in China to be eligible for a one-year exemption of obtaining case-by-case authorization to import U.S.-made equipment.

This privilege is effectively equivalent a suspension of export controls by one year, which can be interpreted as a measure that meticulously took Korean chipmakers’ situation into account. Samsung Electronics and SK Hynix are currently in the process of upgrading production facilities in China, which is reportedly known to require large-scale imports of a wide array of equipment. As the upgrade requires various types of equipment and a case-by-case authorization for importing U.S.-made equipment was feared as a complicated and a time-consuming process. Fortunately, with the exemption offered to Korean chipmakers, they have practically obtained an authorization for importing all required equipment with this single measure.

However, it is evident that the exemption only applies to imports required during the process of upgrading production facilities and it remains unclear if this measure will still be in place after the measure expires in one year’s time. Regarding projects to be implemented in the future, aside from ongoing projects, it is reportedly known that the U.S. government will continue to engage in negotiations with Korea to strike a consensus on to what extent the imports of equipment will be allowed. A source familiar with the issue explained, “It is more appropriate to understand the exemption granted by the U.S. as a temporary measure rather than granting exemption for an indefinite period.” The source added, “The exemption granted this time can be regarded as a measure to ensure hassle-free facility upgrades in China by Samsung Electronics and SK Hynix until the job is complete without applying for separate approvals, whenever they need to import equipment into China.”

Another source mentioned, “We understand this measure announced by the U.S. government as a comprehensive approval limited to specific projects implemented by Samsung Electronics and SK Hynix.” During the process of designing the recent export restriction measure, the U.S. government shared details with Korea, and the Korean government closely engaged in discussions with the U.S. to minimize disruptions in operating facilities in China owned by Samsung Electronics and SK Hynix. It was known that the Korean government specially requested the ongoing upgrades to go forward as scheduled without disruptions.”

It is reportedly known that the U.S. government showed their intention “not to disrupt the production of semiconductor by multinational companies” to the Korean government during the discussions. In order to U.S. to achieve its intended objectives of the measure to control exports, cooperation with Korea is imperative as Korea is a major player in the semiconductor industry. A measure negatively affecting Korean companies can be a burden for the U.S., which can be an element the U.S. took into account. Regarding the exemption granted to Korean chipmakers, the Reuters reported on October 11^th that the U.S. government allowed at two non-Chinese chipmakers to receive products and services that are subject to export control without seeking approvals.

[This news is provided by Yonhap News]