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According to a report by Bloomberg, the Trump administration will increase the difficulty for South Korean chip manufacturers Samsung Electronics Co. and SK Hynix Inc. to ship critical equipment to their chip manufacturing plants in China. This move may impact the production of these two companies in the world's largest semiconductor market, China.

Image Source: U.S. Department of Commerce

According to a notice released on August 29, the U.S. Department of Commerce announced that it will revoke the exemption that allowed Samsung and SK Hynix to use U.S. technology in their factories in China. Previously, these two semiconductor companies were able to operate in China without applying for a new license each time they imported chip manufacturing equipment, based on relevant regulations.

The above measures taken by the Trump administration will revise the so-called "Validated End User" (VEU) rule, which will undermine companies' chip manufacturing capabilities in China and may hinder China's access to certain technologies.

The above exemption can be traced back to 2023, when the Biden administration allowed Samsung and SK Hynix to obtain the equipment needed to maintain and expand the operation of their large factories in China. At that time, the U.S. government effectively granted an indefinite exemption to the broader restriction of "banning the export of advanced chip manufacturing equipment to China."

In response to the above report, SK Hynix stated in a statement that the company will maintain close communication with the South Korean and U.S. governments and take necessary measures to minimize the impact on its business; Samsung has not yet responded to requests for comment.

The U.S. Department of Commerce stated in its announcement of the decision that it does not intend to issue licenses allowing companies to "expand the production capacity of factories in China or upgrade technology." The U.S. Department of Commerce indicated that this move aims to terminate a preferential policy it views as "only aiding foreign manufacturers without providing similar benefits to American manufacturers."

Jeffrey Kessler, the U.S. Deputy Assistant Secretary of Commerce responsible for overseeing export control programs, stated in a declaration: "The Trump administration is committed to closing export control loopholes—especially those that disadvantage American businesses. The above decision is an important step in fulfilling this commitment."

According to the announcement in the U.S. Federal Register, the exemption for Samsung and SK Hynix will expire in 120 days. During this period, companies can apply for licenses to continue operations. The announcement also mentioned a division of Intel Corp., which has been acquired by SK Hynix.

A significant portion of Samsung and SK Hynix's memory chip production capacity relies on Chinese factories. The components produced by these two Korean companies are used in smartphones and consumer electronics assembled in China.

Bernstein's research shows that the removal of exemptions has a relatively small impact on the semiconductor equipment market. In 2024, new equipment spending by non-Chinese companies' factories in China is approximately $2 billion, accounting for less than 2% of last year's total global semiconductor equipment industry sales.

However, overseas companies' factories in China have had a significant impact on the supply of memory chips. The report states that the output of computer memory from these factories accounts for 10% of the global total, and the output of memory chips accounts for 15% of the global total.

These types of chips are critical components for smartphones, supercomputers, and other products that are vital to the tech industry, including Apple's iPhone and Nvidia's processor-based artificial intelligence hardware. The production of these products relies on the stable supply of two types of memory chips.

A few days before making the above decision, President Trump met with South Korean President Lee Jae Myung at the White House. During their meeting on August 25, the two discussed a recently reached agreement—which set tariffs on South Korean goods at 15%, allowing South Korea to avoid the previously threatened 25% tariffs by Trump.

On August 29, the South Korean Ministry of Trade, Industry and Energy issued a statement saying it would take measures to minimize interference with the operations of domestic South Korean companies. The ministry stated, "The South Korean government has maintained close communication with the U.S. Department of Commerce regarding potential adjustments to the VEU system and emphasized the importance of the smooth operation of Korean chip manufacturers' plants in China for the stability of the global semiconductor supply chain."