Washington, D.C. - The U.S. government is considering a new policy that would allow major South Korean semiconductor companies, Samsung Electronics and SK Hynix, to receive annual licenses for importing American-made chip manufacturing equipment to their facilities in China. This move, reported by Bloomberg on September 7th (local time), is seen as a potential easing of the strict 'case-by-case approval' system that the second Trump administration had planned to implement starting in January of the following year. While this new proposal may offer some relief, it still imposes significant limitations on the companies' operations.

This potential policy shift comes after the initial announcement that the U.S. would revoke the "Validated End User" (VEU) status for Samsung and SK Hynix, a designation that had previously allowed them to freely import U.S. equipment to their Chinese fabs without individual permits. This VEU status, granted by the Biden administration in October 2023, is also being withdrawn for other major players, including Taiwan's TSMC.

The new proposal, known as a 'site license' system, was reportedly presented to the South Korean government last week by the U.S. Department of Commerce. Under this system, Samsung and SK Hynix would need to provide the U.S. government with a detailed, annual list of the equipment and quantities they plan to import to their Chinese factories. This advance approval process would replace the previously announced individual permits, which would have required an estimated 1,000 additional export applications annually for products from major U.S. companies like Applied Materials (AMAT) and Lam Research.

While this site license option provides a reprieve from the logistical nightmare of numerous individual applications, it still presents challenges. Industry insiders express concern that it is nearly impossible to accurately predict equipment needs for an entire year due to fluctuating market conditions and technological demands. Furthermore, a major point of contention is the potential for leakage of trade secrets. The process of seeking annual approval would require the companies to share sensitive information about their operational plans in China with the U.S. government, a disclosure that raises significant concerns about the protection of proprietary business information.

The potential for such a compromise reflects a response to growing pushback from both the South Korean government and the global semiconductor industry, which have been vocal about the difficulties of the proposed 'case-by-case' system. According to Bloomberg, the site license system is seen as a double-edged sword: it offers a measure of relief and predictability but still places a considerable burden and continued oversight on South Korean firms operating in China.