TLDRs;
- Washington may replace indefinite export approvals for Samsung and SK Hynix with yearly licenses after 2025.
- Experts warn yearly applications could slow shipments of vital equipment, risking production delays in China facilities.
- The move reflects broader US-China tech rivalry and tighter semiconductor export controls introduced since 2022.
- Heavy reliance on Chinese markets and materials leaves Korean chipmakers vulnerable under stricter US oversight.
The United States is preparing to tighten semiconductor export rules for South Korean chipmakers Samsung Electronics and SK Hynix, two of the world’s largest memory manufacturers.
According to reports, Washington may replace indefinite export approvals with an annual licensing system starting after 2025.
Currently, both companies benefit from a “validated end user” (VEU) designation that allows ongoing shipments of restricted chipmaking equipment and materials to their factories in China, provided they meet upfront security commitments. The proposed change would require Samsung and SK Hynix to apply each year for permission to send equipment and supplies in specified quantities.
Industry warns of supply chain risks
While US officials argue the measure is aimed at maintaining oversight without halting production, industry groups fear the added bureaucracy could slow down critical operations.
Manufacturers worry that yearly reviews may cause administrative bottlenecks and delays in securing replacement parts or urgent equipment, potentially disrupting production schedules.
Samsung and SK Hynix have invested heavily in China, with over $30 billion in facilities supporting both domestic and global supply chains. Analysts say the yearly approval system could make it harder for them to respond quickly to equipment failures or market shifts.
Part of broader US-China tech rivalry
The move is part of a broader escalation in US export controls on semiconductors and advanced technology. In October 2022, Washington introduced sweeping restrictions to curb China’s access to chipmaking tools and advanced processors critical for artificial intelligence and military applications.
Shifting from indefinite waivers to annual licenses underscores the Biden administration’s emphasis on national security oversight, even at the cost of operational efficiency for allied companies. Policy analysts warn that the shift could create ripple effects, as China continues to accelerate domestic semiconductor development in response to restrictions.
Already, American firms have reported revenue losses linked to tighter rules, while some experts caution that these measures may inadvertently spur Beijing to double down on self-sufficiency.
South Korea’s strategic vulnerability
For South Korea, the stakes are particularly high. China accounted for $46.6 billion, or nearly one-third, of the country’s $141.9 billion semiconductor exports in 2024. Beyond sales, South Korea also depends on China for nearly half of its rare earth material imports, essential for chip production.
The proposed annual licensing system would require Samsung and SK Hynix to forecast their exact needs 12 months in advance. This could create operational hurdles, especially for facilities that need flexible supply options to deal with unexpected repairs or surges in demand.
Recognizing these vulnerabilities, Seoul has announced plans to reduce reliance on Chinese imports of critical materials from 70% to 50% by 2030. The government has pledged nearly $38 billion to strengthen domestic production capacity and diversify sourcing.
Ongoing talks, no final decision yet
Discussions between US and South Korean officials are still underway, and no final decision has been announced. While Washington insists the changes are intended to enhance oversight without crippling production, the semiconductor industry is bracing for a more complex regulatory landscape.
The outcome of these negotiations will shape not only the future of Samsung and SK Hynix’s operations in China but also the broader balance of global semiconductor supply chains, where geopolitics increasingly dictates market realities.
