South Korean chipmakers hit as US revokes China equipment waivers

Shares in South Korea’s biggest semiconductor producers fell on September 1 after Washington revoked waivers that had allowed them to send US chipmaking equipment to their facilities in China without a licence.

SK Hynix shares dropped nearly 5 per cent, while Samsung Electronics slipped more than 2 per cent after the US Commerce Department said it was ending the companies’ “validated end user” status, Financial Times writes. 

The waiver system, introduced under former president Joe Biden, had let the world’s two largest memory chipmakers transfer US tools to their Chinese plants without applying for individual licences. The arrangement was designed to prevent weakening their competitiveness in favour of Chinese rivals.

On August 29, the Commerce Department said it had closed the “Biden-era loophole.” It confirmed that companies would now need licences to ship US equipment to Chinese semiconductor fabs, while making clear that approvals would be limited.

The department said it would allow licences “to operate their existing fabs in China” but would not grant them for “expand[ing] capacity or upgrade[ing] technology at fabs in China.”

The restrictions affect major operations for both South KoreanF groups. Samsung’s Xi’an plant accounts for about 30 per cent of its global Nand flash memory output, while SK Hynix’s Wuxi fab produces 35 per cent of its Dram chips. Its Dalian plant, acquired from Intel, makes 37 per cent of its Nand chips, according to Bernstein analysts.

CW Chung, joint head of Asia-Pacific equity research at Nomura, said Samsung and SK Hynix “had continued to upgrade their Chinese facilities, hoping that the US waiver would be kept in place.”

He added: “While the short-term impact on their production in China is limited, the South Korean chipmakers will have to think hard now whether to continue their operations there.”

Kim Yang-paeng, a researcher at the Korea Institute for Industrial Economics and Trade, warned that the curbs would widen the technological gap between the less advanced “legacy” chips made in China and the cutting-edge memory chips produced in South Korea. But he noted that the “strong demand for legacy memory chips” would support profitability in China for now.

Analysts also cautioned about broader market implications. Stacy Rasgon, a senior analyst at Bernstein, said US authorities were likely to continue granting licences for South Korean companies to sustain existing operations because “suddenly removing them from the global market would create shortages and price surges.”

He added that while Chinese equipment makers were unlikely to benefit directly, “it does demonstrate that geopolitical tensions will likely only become tighter over time, further accelerating domestic substitution trends.”

South Korean groups are also under growing pressure from Chinese rival CXMT, which has boosted its share of the $90bn global Dram market from almost nothing in 2020 to 5 per cent in 2024, according to Shenzhen-based consultancy Qianzhan.

SK Hynix said it would seek to “minimise the impact on our business.” Samsung declined to comment.

By Sabina Mammadli