Key Takeaways
1. The U.S. is replacing VEU permissions with annual “site licenses” for Samsung and SK Hynix’s factories in China to limit upgrades and expansions.
2. The new licenses will outline approved amounts of restricted tools, parts, and materials, adding more regulatory requirements.
3. The shift aims to enhance U.S. oversight but complicates planning for companies due to unpredictable equipment needs.
4. The change is part of the Trump administration’s effort to close perceived loopholes from the Biden era, emphasizing a stricter regulatory approach.
5. Industry concerns include potential supply instability for DRAM and NAND, risking global shortages for smartphones and data centers.
The U.S. is getting ready to switch from the current VEU permissions for Samsung and SK Hynix’s factories in China to annual “site licenses.” These licenses will outline approved yearly amounts of restricted tools, parts, and materials. The goal is to maintain the operation of existing factories while preventing any upgrades or expansions. The current VEUs will expire at the end of the year. South Korean officials see this new regulation as manageable but worry about the extra red tape it brings.
Background of Export Restrictions
The roots of these export restrictions can be traced back to 2022, when initial controls focused on advanced logic (about 16nm FinFET), DRAMs (18nm half-pitch), and 3D NAND (128 layers or more). During that time, the VEU system allowed Samsung and SK Hynix continuous approvals, as long as they adhered to certain monitoring and security requirements.
Changes in Administration
After these controls were put in place, waivers were granted during the Biden administration to facilitate operations. Now, the new Trump administration is working to eliminate what it believes are “loopholes” from the Biden era by cancelling VEUs and introducing annual site licenses.
With the suggested new system, companies would only need to submit one application per year, detailing specific items and their amounts. This adjustment gives the U.S. more notice before shipments occur, yet it complicates planning for companies since they can’t predict when equipment might fail and require replacement parts. U.S. officials mention that urgent licenses can be processed quickly, but many industry players are skeptical of this.
Industry Concerns
These alterations bring up worries about the stability of DRAM and NAND supplies. If equipment breaks down during the year or new shipments are postponed, it could impact parts for smartphones and data centers, potentially causing global shortages. This policy once again places Seoul in a tricky position between its key ally and its largest trading partner.
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