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U.S. cuts off Samsung and SK's Chinese plants from importing chipmaking tools: 'It risks opening market space'

Published: 31 Aug. 2025, 19:40

The photo shows a production line at SK hynix’s plant in Wuxi City, China. [YONHAP]

The U.S. Commerce Department revoked the validated end-user (VEU) status of Samsung Electronics and SK hynix plants in China, cutting off a fast track for importing advanced chipmaking tools and tightening the squeeze on Korean memory makers caught between Washington and Beijing.

"Today, the Department of Commerce’s Bureau of Industry and Security closed a Biden-era loophole that allowed a handful of foreign companies to export semiconductor manufacturing equipment and technology to China license free," the Bureau of Industry and Security said in a revision posted on Friday.

The decision tightens the VEU program, which let approved firms ship some chipmaking tools to China without applying for a license each time. Samsung Electronics and SK hynix used it after Washington imposed broad chip controls in 2022. The U.S. Commerce Department's VEU revocation stretches to SK hynix's plant in Dalian, China, for which the company paid Intel the full 11 trillion won ($7.9 billion) acquisition price in March.

Taiwanese manufacturer TSMC, on the other hand, stands outside the latest action because the Donald Trump administration revoked the VEU status of only Korean companies. The VEU program had previously waived restrictions on Korean, U.S. and Taiwanese companies.

TSMC said in its March business report that its Nanjing fab had received a permanent VEU. That means Washington does not object to either the Shanghai plant running legacy nodes of 100 nanometers and above or the Nanjing fab that produces 16- and 28-nanometer chips.

The United States also keeps VEU status in place for the China-based U.S. companies such the research, development and service centers of AMD, Applied Materials and Lam Research.

The Commerce Department said in a statement that the United States plans to grant license applications to allow the Korean companies to operate their existing facilities in China but does not intend to grant licenses to expand capacity or upgrade technology.

The photo shows the SK hynix headquarters in Icheon on Jan. 23. [YONHAP]

The new move could be critical, as Samsung Electronics produces roughly 40 percent of its NAND in Xi'an, China, while SK hynix makes about 40 percent of its dynamic random access memory (DRAM) in Wuxi City, China, and around 20 percent of its NAND in Dalian. The tighter rule means the companies no longer bring in many tools that had remained permissible outside advanced DRAM and 3-D NAND equipment.

In March, SK hynix completed the transfer of Intel’s NAND business and the Dalian manufacturing site and disclosed $3.7 billion in unsecured loans to that plant.

A document released by the U.S. Department of Commerce [SCREEN CAPTURE]

“Because the Trump administration uses everything as a bargaining chip, it could try to leverage the stripped VEU status to push for more U.S. investment,” said Jeong Hyung-gon, senior research fellow at the Korea Institute for International Economic Policy. “But the policy line that urges decoupling from the Chinese market has not changed.”

At this rate, the memory chips Samsung Electronics and SK hynix can make at their China fabs will skew increasingly toward older-generation products. In that market, they will have to compete on price with Chinese rivals.

The photo shows the Samsung Electronics building in southern Seoul on July 31. [YONHAP]

"This move will make it harder for Korean chipmakers with facilities in China to continue producing more advanced chips,” Chris Miller, a professor at Tufts University, told Reuters on Sunday. "If this isn't accompanied by further steps against YMTC [Yangtze Memory Technologies] and CXMT [ChangXin Memory Technologies], it risks opening market space for Chinese firms at the expense of Korean firms."

The Chinese Commerce Ministry also criticized Washington's move and said, "the United States instrumentalizes export controls for selfish ends." The Ministry warned that it would take necessary measures to defend companies' legitimate rights and interests.

The policy shift landed as Chinese tech firms accelerated efforts to localize chips.

Alibaba’s plan to develop an in-house AI inference chip added to those signals, leading U.S. chip stocks to fall on Friday. The Philadelphia Semiconductor Index closed down 3.15 percent, and Nvidia fell 3.32 percent. The Wall Street Journal reported that Alibaba, long one of Nvidia's and TSMC’s key customers, plans to design a new chip in-house and have a Chinese company manufacture it.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY SHIM SEO-HYUN, LEE GA-RAM [[email protected]]