The U.S. Commerce Department's Bureau of Industry and Security (BIS) has changed its policy to allow exports by approving annual volumes of equipment, instead of canceling the "validated end-user" (VEU) status for the China plants of Korean semiconductor corporations. This means Samsung Electronics and SK hynix will avoid having to wait for U.S. approval each time they bring equipment into their China semiconductor plants to keep them running.
According to the industry on the 30th, BIS decided to introduce a system under which, rather than canceling VEU status, semiconductor corporations receive separate approval every year in the process of bringing semiconductor equipment into China. If corporations apply in advance each year for the types and quantities of semiconductor equipment and parts they need, the U.S. government will review and decide whether to approve the exports. While this is a more stringent process than being re-added to the VEU list, a comprehensive export license, it is seen as a relaxation compared with obtaining individual approvals each time equipment is brought in.
VEU refers to an exceptional status that allows the supply of U.S.-made equipment without separate licensing procedures or time limits, as long as certain security conditions are met. Until now, Samsung Electronics' Xi'an NAND plant in China and SK hynix's Wuxi DRAM and Dalian NAND plants in China had been recognized by the U.S. government with VEU status and brought in U.S.-made equipment without restrictions.
However, at the end of Aug., BIS said it would remove three China legal entities operating these plants from the VEU list. The measure was scheduled to take effect on the 31st, 120 days from Sept. 2, the date of publication in the Federal Register. If the measure were implemented, the China plants of domestic corporations would have had to obtain individual U.S. government licenses every time they brought in U.S.-made equipment starting on the 31st. Concerns were raised that, beyond the question of approval, administrative processing times and other factors would cause significant disruptions to plant operations in China.
Some note that business uncertainty remains even if the new measure takes effect. It is virtually impossible for semiconductor corporations to accurately predict the equipment and parts they need on an annual basis. It is also known that even if the U.S. government allows equipment exports each year, it will maintain its policy of not permitting equipment shipments for expansions or upgrades of plants in China.