The Biden administration intends to exempt SK Hynix and Samsung from the brunt of new Chinese memory chipmaker restrictions intended to thwart Beijing’s technological ambitions and obstruct its military advancements, according to reports quoting sources.

According to the sources, requests from American suppliers to send equipment to Chinese companies like Yangtze Memory Technologies Co Ltd (YMTC) and ChangXin Memory Technologies, Inc (CXMT) that manufacture advanced DRAM or flash memory chips will likely be turned down by the Commerce Department, which this week plans to announce new restrictions on technology exports to China.

According to sources, however, license requests to sell equipment to foreign businesses that manufacture advanced memory chips in China will be examined on a case-by-case basis, potentially allowing them to receive the machinery.

“The goal is not to hurt non-indigenous companies,” one of the people briefed on the matter said.

Both the Commerce Department and the White House declined to comment. Requests for comment from SK Hynix Inc, Samsung Electronics Co Ltd, YMTC, and CXMT went unanswered.

The expected rules were referred to as “sci-tech hegemony” on Thursday by the Chinese Embassy in Washington. It claimed that the United States was hindering and stifling the development of emerging markets and developing nations with its “technological prowess.”

The action may allay the worst worries of South Korean memory chip manufacturers that the United States might stifle their China-based manufacturing business in an effort to derail China’s rise, devastate YMTC, and defend weak U.S. memory chip manufacturers.

However, they continue to be concerned that the case-by-case review standard is far from being an explicit approval for the shipment of American equipment to their Chinese facilities and might lead to disagreements with regulators regarding which shipments to approve.

Unreported previously are some of the new regulations that affect memory chip manufacturers in China.

The new restrictions are directed at Chinese manufacturers of NAND and DRAM chips, which are used to store data and files and to temporarily store information from applications on a system.

If selling to companies making DRAM chips above the 18 nanometer node, NAND Flash chips below 128 layers, or logic chips above 14 nanometers, US suppliers seeking to ship equipment to Chinese semiconductor firms wouldn’t need to apply for a license from the Commerce Department, the sources said.

However, US companies selling cutting-edge technology to local Chinese chipmakers who make logic chips with a minimum size of 14 nanometers, DRAM chips with a minimum size of 18 nanometers, or NAND flash chips with a minimum size of 128 layers, would need to apply for a license and have it reviewed under the strict “presumption of denial” standard.

The sources added that US suppliers would also need a license in order to sell the equipment to non-Chinese origin businesses operating in China that make the same kinds of chips, though individual license requests would be considered on a case-by-case basis.

According to export control experts, if the rules are published as anticipated, it would be the first US attempt to use export controls to target Chinese production of memory chips without specific military applications, representing a more comprehensive view of American national security.

They would also strike YMTC, a 2016-founded rising force in the NAND chip industry. According to a June 2021 report from the White House, its growth and low-cost offerings pose “a direct threat” to Western Digital Corp. and Micron Technology Inc., both of which are based in the United States.

The Commerce Department is already looking into whether YMTC sold chips to the Chinese telecom company Huawei Technologies Co. Ltd. in violation of export laws. Apple Inc. is considering using its chips in some of its iPhones in China, which is a major worry for American lawmakers and the Biden administration.

The regulations may also harm CXMT, a Chinese firm supported by the government that is attempting to break into the DRAM market.

The restrictions are likely to affect LAM Research Corp, Applied Materials Inc, and KLA Corp, three of the largest U.S. suppliers of chip manufacturing equipment. When contacted for comment, LAM and Applied Materials did not provide any. KLA opted not to respond.

In the Shaanxi Province of China, Samsung of South Korea has a facility making NAND Flash memory chips. Competitor SK Hynix from South Korea has acquired Intel Corp’s Dalian NAND flash memory chip manufacturing operation and makes DRAM chips at another Chinese facility.

Walt Coon of consulting firm Yole Intelligence claims that 25% of SK Hynix’s and Samsung’s NAND wafer production, as well as 38% of SK Hynix’s and about 50% of SK Hynix’s DRAM production, are based in China.

As part of an effort to slow China’s advancements in the semiconductor industry and safeguard American businesses, the United States was reportedly considering restricting shipments of American chipmaking equipment to memory chip manufacturers in China, including YMTC.

Additionally, Reuters revealed last month that the Biden administration intended to broaden restrictions on American shipments of semiconductors used in chip manufacturing and artificial intelligence to China in October.

(Adapted from Reuters.com)

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