SK Hynix Gets One-Year Reprieve From U.S. Chip Restrictions on China

The U.S. has been working to get allies on board with the restrictions and consider enacting similar ones themselves. The rules had appeared to carve out at least one concession to some of those allies: The Commerce Department would review applications for certain exports to U.S. and U.S.-allied facilities operating in China on a case-by-case basis. Meanwhile, Chinese-owned facilities would face a presumption of denial.

The timeline for the granting of the licenses wasn’t immediately shared, spreading confusion and concern across the semiconductor industry and helping trigger stock-market falls earlier this week for major chip players.

On Wednesday, SK Hynix became the first chip maker with production sites in China to publicly acknowledge having received a temporary exemption from the U.S. requirements.

SK Hynix said it received a letter from the Commerce Department’s Bureau of Industry and Security that ensures the company can supply its China-based facilities with the equipment and items needed for one year without meeting additional licensing requirements. That allows SK Hynix to continue its memory-chip production in China. The South Korean company didn’t specify when the one-year exemption ends.

The Commerce Department didn’t immediately respond to a request for comment. But one critic of the new controls raised concerns that exemptions could undermine the intent of the new rule.

“If Commerce won’t limit the opportunities for foreign companies to earn revenue from China sales, it will never do so for American companies,” said

Derek Scissors,

a senior fellow at the American Enterprise Institute, a conservative-leaning think tank. “All these license requirements are just paperwork—sales to China will only see a brief pause.”

SK Hynix, the world’s second-largest memory-chip maker by revenue, operates production facilities in the Chinese city of Wuxi. Output there accounts for about 13% of the world’s total production capacity for DRAM, one of two major types of memory chips that go in smartphones, PCs and other devices, according to TrendForce, a Taiwan-based market research firm.

SK Hynix also owns

Intel Corp.’s

NAND flash-memory-chip factories in Dalian through a deal struck two years ago, though the operational transfer is continuing and is expected to be finished in 2025. SK Hynix, in its statement, said its Chinese facilities were exempted but didn’t name any facility by name.

China ranks among the world’s biggest markets for semiconductor sales and chip-making equipment. It represents a fast-growing slice of global chip-production capacity, as Beijing seeks to become more self-sufficient with its tech supply chain.

Fears of the ripple effects from the Commerce Department rules helped drive a Tuesday selloff in shares of SK Hynix,

Samsung Electronics Co.

and

Taiwan Semiconductor Manufacturing Co.

, which dropped 8.3% for its lowest closing in more than two years.

On Wednesday, SK Hynix rose 4.2%, while Samsung Electronics increased 0.7%. TSMC, the world’s biggest contract chip maker, declined 1%.

Samsung Electronics, the world’s largest memory-chip maker with facilities in the Chinese cities of Xi’an and Suzhou, declined to comment on whether it had received an exemption letter from U.S. authorities.

TSMC didn’t respond to a request for comment on whether it had received any notices regarding exemptions from the Commerce Department.

On Wednesday, South Korea’s Ministry of Trade, Industry and Energy reiterated that the U.S. planned to review, on a case-by-case basis, exports of chipmaking equipment supplied to China-based factories operated by South Korean companies.

“We’ll make every effort to ensure that our companies producing semiconductors in China can obtain the necessary license needed for supplying equipment,” the Trade Ministry said.

Earlier, the South Korean trade ministry said that the new U.S. restrictions were projected to have limited impact overall to South Korean companies operating in China, including Samsung and SK Hynix.

U.S. chip-equipment manufacturers, which have growing business in China, haven’t spoken publicly on how they would be affected by the Commerce Department’s latest restrictions.

—John D. McKinnon contributed to this article.

Write to Jiyoung Sohn at [email protected]