How Did Samsung and SK Hynix Bypass the New Controls on Microchip Exports to China?
Updated: Feb 14
In October of 2022, the US Department of Commerce’s Bureau of Industry and Security (BIS) issued a notice entitled Commerce Implements New Export Controls on Advanced Computing and Semiconductor Manufacturing Items to the People’s Republic Of China (PRC). This notice came two months after the senate was able to finally sign the Creating Helpful Incentives to Produce Semiconductors and Science (CHIPS) Act into law.
A very interesting development from these new regulations was the grant of one-year licenses to Samsung and SK Hynix to continue operations in China. The two South Korean companies produce semiconductors in China that are used in computers, smartphones and cars. Many exporters may be confused as to why they were given licenses for such a seemingly harsh and broad set of regulations. Understanding the regulations themselves is an important key for explaining these licenses, view our explanation for understanding the applicable language and scope.
The new semiconductor regulations are focused on discouraging the development of PRC surveillance and intelligence military technology. In furtherance of these goals, BIS focused heavily on hindering the development of supercomputing and advanced processing chips. Many technology companies and manufacturers in China are either subsidiaries or outright owned by the government, making them susceptible to U.S. officials’ presumption that their technology research is being used to support government and military development. Companies that export more technology used to make more advanced computing parts and chips such as [ASML] were more harshly effected by these regulations and have had a more difficult process in determining how to navigate said regulations.
Lastly, the CHIPS act is also a silent but potentially large piece of understanding the dynamics of these licenses as well. The main goal of the act is to develop a strong chip and computing manufacturing sector in the U.S. With this goal, it is clear that the U.S. government would need to remain on the best terms possible with the currently established industry giants so that they will consider taking advantage of the Act. Samsung and SK Hynix both being South Korean owned companies make it very easy for the U.S. to be more lenient towards them in the interest of upholding strong partnerships.
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