The next U.S. export ban against China could target advanced chip packaging, according to Taiwanese media reports on Thursday. This move could be a blow to many South Korean companies that supply packaging equipment to Chinese companies.
The U.S. government announced plans to restrict the sale of more advanced artificial intelligence (AI) chips to China on Tuesday, in a move to close loopholes in existing regulations first introduced in October 2022.
The U.S. is considering expanding export controls to advanced packaging equipment, according to Taiwanese sources familiar with the matter.
Advanced chip packaging uses technology that merges different microchips together to create a single device with enhanced performance.
Major chipmakers such as AMD, Intel, Samsung, and TSMC have been investing in advanced chip packaging to capitalize on the AI boom. AI chips require high-performance, low-power chips that can rapidly process massive quantities of data, according to consultancy McKinsey.
"U.S. regulations on advanced semiconductors are forcing Chinese companies to focus on advanced chip packaging," said an industry insider with knowledge of the situation.
The U.S. government is starting to recognize this loophole and is preparing additional regulations, according to a report in DigiTimes. The export ban, if implemented, could negatively affect Korean chipmakers that operate packaging facilities in China, including Samsung Electronics and SK Hynix.
Samsung and SK Hynix say they are not likely to be affected by such bans if they are implemented, as both factories do not solely specialize in advanced packaging. However, industry insiders are worried that both companies may face problems with supplying related equipment if the U.S. decides to further tighten export curbs.
Korean equipment manufacturers are also likely to suffer. Back end semiconductor manufacturing equipment exports to China fell from $944.1 million in 2021 to $663.5 million in 2022. The Chinese market accounted for more than 50 percent of the total equipment exports.
This article was originally published on Oct. 19, 2023.