US Considers Canceling Chinese Factory Chip Equipment Waivers For TSMC, Samsung & SK hynix

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Following on his bid to limit advanced technology transfer to China, the Commerce Department’s Bureau for Industry and Security (BIS)’s Under Secretary of Commerce for Industry and Security, Jeffrey Kessler, is seeking to rescind waivers granted to American chip manufacturing equipment companies to sell some products to semiconductor manufacturers in China, suggest reports from the Wall Street Journal and Reuters. Kessler discussed his plans in detail at a House subcommittee hearing earlier this month, and according to the WSJ, Samsung, TSMC and SK hynix could experience difficulty in acquiring American chip manufacturing tools for their facilities in China.

US Etching, Deposition and Other Chip Manufacturing Tools Could Be Limited From Being Sold In China, Suggest Reports

While manufacturing the most advanced semiconductors requires lithography equipment from the Dutch firm ASML, older chips can be manufactured with non-EUV or deep ultraviolet (DUV) lithography equipment. Additionally, as lithography is only the first step in the semiconductor fabrication process, other firms, such as Lam Research and KLA Corp, also play a key role in the chip manufacturing supply chain.

The WSJ and Reuters reports suggest that these firms might find it challenging to sell chip manufacturing equipment, such as etching and deposition machines, to Samsung, TSMC and SK hynix in China. The three firms operate memory and mature node manufacturing facilities in the Asian country, and so far, they have enjoyed a blanket US waiver to import American machines for their operations.

The WSJ names Kessler and suggests that the Commerce official told the three firms earlier this week that he was interested in canceling their waivers, which allow American firms to ship equipment to them without requiring a license from the government.

However, both reports suggest that while canceling these waivers is considered an option, it hasn’t been exercised yet. The goal is to even the scales in trade negotiations with China’s licensing system for rare earth metals, which have become a point of contention in its trade discussions with the US. China has purportedly placed a six-month expiration date for its rare earth mineral export licenses, while President Trump has insisted that the country supply “any necessary rare earths” upfront as part of its trade agreement with the US.

The WSJ notes that government officials worry that excessive restrictions on US chip manufacturing equipment sales to China could stimulate the country’s domestic chip manufacturing industry. Unlike high-end EUV scanners, other chip manufacturing equipment does not face as many constraints when it comes to design and manufacturing.

Chinese chip manufacturing equipment providers, such as ACM Research, Advanced Micro-Fabrication Equipment Inc. (AMEC) and the NAURA Group saw their revenue grow by as much as 45% in 2024 as domestic manufacturers geared up to compete with the country’s largest chip manufacturer, the Semiconductor Manufacturing International Corporation (SMIC).

A White House official speaking to Reuters asserted that the government did not intend to rescind the waivers as of now. Doing so could complicate trade negotiations between the US and China and complicate US relations with allies such as South Korea and Taiwan.

Speaking to a House subcommittee earlier this month, Kessler remarked that the partnership between the US and allied nations was incomplete in “important ways” which was “enabling US adversaries to advance and cultivate their technology.”