US officials are proposing to allow South Korea’s Samsung Electronics and SK Hynix to apply annually for licences to ship American-made equipment and technology to their extensive semiconductor factory operations in mainland China, aiming for a compromise to prevent disruptions to the global electronics industry after they revoked previous open-ended waivers, Bloomberg reported.
US Commerce Department officials reportedly presented the “site licence” idea to their South Korean counterparts after the previous validated end-user, or VEU, indefinite licences were rescinded and are due to expire at the end of this year.
Under the VEU waivers, the two companies had indefinite approval to ship estimated quantities of supplies, based on security and monitoring commitments, to the Chinese sites.
Complexity, uncertainty
The site licence proposal would instead allow them to seek approval for a year’s worth of equipment, parts and materials listed in exact quantities, the report said, citing unnamed people.
The proposal is a way of closing what the White House called a “loophole” introduced under the previous administration, while simplifying the approval process for two of the biggest players in the global chip manufacturing industry.
US officials said in a federal notice that revoking the companies’ VEU status would require them to process an additional 1,000 permits each year.
The Commerce Department has said it would approve licences for equipment that allowed the China plants to continue operating under the status quo, but not to upgrade or expand.
But companies operating plants in China, including Samsung, SK Hynix and Taiwan’s TSMC, whose VEU status was also rescinded, have concerns about whether the licence approval process would be rapid enough to allow predictable operation and maintenance of the sites.
The site licence idea presents its own problems, as companies would be forced to predict exact quantities of the materials needed at their plants in China, with any parts needed for unpredictable reasons would be subject to a separate licence approval process.
Licence approvals
Previous reports have said that companies face a significant backlog of existing licence requests.
A US official told Bloomberg that the country has a robust system to quickly issue licences if the need arises.
The VEU deals were agreed as a diplomatic deal to allow plants in China operated by companies based in South Korea or Taiwan to continue operating smoothly after the Biden administration introduced wide-ranging export controls on US chipmaking equipment in an effort to hobble China’s chip industry.
Their removal has strained relations with South Korea, as the move was announced days after the country agreed to invest $350 billion (£258bn) in the US under a preliminary tariff deal announced in July.
Last week, US immigration officials conducted a massive raid on a Hyundai plant in Georgia, arresting hundreds of South Korean workers, in a move that led to further questions around Washington’s relations with South Korea.
