US Reviews Potential Cancellation of Chip Equipment Waivers for TSMC, Samsung, and SK Hynix Factories in China

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Commerce Department Considers Limiting Chip Manufacturing Equipment Exports to China

In a bid to curb the transfer of advanced technology to China, the Bureau for Industry and Security (BIS) under the Commerce Department is contemplating revoking waivers that have allowed American companies to export certain chip manufacturing equipment to Chinese semiconductor manufacturers. Reports from The Wall Street Journal and Reuters indicate that Jeffrey Kessler, the Under Secretary for Industry and Security, is at the forefront of this initiative.

Potential Restrictions on Essential Semiconductor Manufacturing Tools

The production of cutting-edge semiconductors primarily relies on advanced lithography equipment, such as that produced by ASML, a Dutch firm. However, older generations of chips continue to be produced using deep ultraviolet (DUV) lithography technology. Moreover, lithography is just the initial phase of the intricate semiconductor fabrication process, which significantly involves firms like Lam Research and KLA Corp, that provide critical manufacturing tools.

These three companies maintain memory and mature node manufacturing facilities in China and have benefited from broad waivers permitting them to import American machinery without government licensing. Recently, Kessler reportedly expressed interest in revoking these waivers, thereby potentially altering the operational landscape for American firms in China.

Lam Research's Sense.i platform for plasma etching. — Lam Research’s Sense.i platform for plasma etching. Image: Lam Research

Negotiating With China: A Complex Trade Environment

While discussions about canceling these waivers are ongoing, no formal actions have been taken yet. The broader objective appears to be leveling the playing field against China’s licensing restrictions on exports of rare earth metals, an ongoing point of friction in US-China trade negotiations. Notably, China has imposed a six-month expiry on its rare earth mineral export licenses, while U. S.officials, including former President Trump, have suggested that China should provide all required rare earths upfront as part of their trade agreement.

The Wall Street Journal highlights concerns among government officials regarding the potential unintended consequences of excessive restrictions on U. S.chip manufacturing equipment sales to China. Such limitations could inadvertently bolster the domestic Chinese semiconductor industry, which already possesses fewer constraints on certain manufacturing processes compared to high-end EUV scanners.

The Rise of Domestic Chinese Chip Manufacturing

Chinese companies involved in chip manufacturing equipment, such as ACM Research and Advanced Micro-Fabrication Equipment Inc.(AMEC), have reported substantial revenue growth, with increases of up to 45% in 2024. This surge corresponds with an intensified push by local manufacturers to compete against industry giants like the Semiconductor Manufacturing International Corporation (SMIC).

According to a White House official cited by Reuters, there are no immediate plans to revoke the waivers. Such action could complicate the already delicate trade negotiations between the U. S.and China, while also affecting relationships with allies such as South Korea and Taiwan.

During a recent House subcommittee meeting, Kessler elaborated on the complexities of U. S.partnerships with allied nations, indicating that the current alliances were lacking in crucial areas, ultimately giving adversaries more opportunities to gain technological advances.

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