U.S. authorities seek to halt memory chip production by Samsung and SK Hynix within China
The US Commerce Department has made a significant move by terminating the Verified End User (VEU) status of Samsung and SK Hynix, two major producers of DRAM and NAND flash memory. This decision, published in the Federal Register, will have a substantial impact on the companies' operations in China.
The VEU program allows companies vetted by the US government to bypass certain license requirements. However, with this decision, Samsung and SK Hynix will now need to obtain specific licenses from the US government to continue purchasing US semiconductor manufacturing equipment for their Chinese factories. These licenses will allow them to operate existing facilities but not to expand capacity or upgrade technology, under rules effective in 120 days. They must comply with these licensing requirements to keep their Chinese factories running.
Samsung's NAND flash production plant in Xian, China, accounts for approximately 40% of its total NAND flash production. Similarly, SK Hynix produces about 40% of its DRAM at a facility in Wuxi, China. The companies have 120 days to obtain necessary licenses to continue supplying their Chinese plants, chipmaking equipment, and other controlled products.
The termination of the VEU status may make it harder for Samsung and SK Hynix to continue manufacturing in China. This could potentially disrupt the supply chain of these companies, which could have ripple effects on the global electronics industry.
In a related development, late last year, the Biden administration moved to restrict the sale of advanced high-bandwidth memory (HBM) used in AI accelerators, limiting Samsung and SK Hynix's ability to do business in China. This move, coupled with the revocation of the VEU status, further complicates the situation for these companies.
Meanwhile, Alibaba is looking to end its reliance on Nvidia for AI inference. This move could potentially provide a new avenue for Samsung and SK Hynix, as they seek to navigate the challenges posed by the US-China trade tensions.
The notice does not specify how the termination of the VEU status will be enforced or what consequences companies may face. However, it is clear that this decision will have far-reaching implications for Samsung, SK Hynix, and the global semiconductor industry.
In other news, Taiwan has indicted three individuals over alleged theft of TSMC trade secrets. This incident underscores the importance of intellectual property protection in the highly competitive semiconductor industry.
AI arms dealer Nvidia has lamented the losses due to the US-China trade war. The company, along with AMD, has agreed to a 15% tax on H20 and MI308 sales to China to secure export licenses. This move is an attempt to navigate the complexities of the US-China trade tensions while ensuring continued business operations.
Finally, Intel's memory manufacturing facilities in China, which were previously listed in the notice, were sold to SK Hynix this spring. This sale could potentially provide SK Hynix with a strategic advantage as it navigates the challenges posed by the US-China trade tensions.
As the situation continues to evolve, it will be interesting to see how Samsung, SK Hynix, and other players in the semiconductor industry adapt to these changes and navigate the complexities of the US-China trade tensions.
