BIS Having 'Deep Dialogue' With Korean Companies on 1-Year Chip Waiver, Official Says

South Korean chip companies are dealing with significant “uncertainty” stemming from U.S. chip controls issued in October against China (see 2210070049) and are concerned about the looming expiration of a one-year authorization from the Commerce Department, a Korean economic security expert said last week. Although Bureau of Industry and Security Undersecretary Alan Estevez said the agency is working with Korean companies on potentially extending certain aspects of the authorization, details of those conversations remain unclear.

After BIS issued its October China chip controls, the agency issued one-year authorizations for certain companies to continue their operations in China, including South Korea’s Samsung and SK Hynix (see 2210310044 and 2210120002). Analysts predicted the companies eventually would shift their future chip plans to other regions after the one-year waiver expires.

Speaking during an event last week hosted by the Center for Strategic and International Studies, Jaemin Lee, a professor at Seoul National University, said it’s not “entirely clear how the annual evaluation by the Department of Commerce will actually play out.” The “uncertainty and ambiguity” hovering over Samsung and SK Hynix of not knowing whether their activities will continue to be authorized is “a significant burden,” he said.

“Of course, Korean companies will try to accommodate and adhere to the new regulations,” he said, but added that Commerce has “discretion” in how it wants to pursue the waiver. “There is a clear signal from the United States that Korean companies will have to adjust their operations in China,” he said. “And I think Korean companies are now trying hard to adjust to the new environment and the new regulations.”

Estevez said BIS is working with South Korean firms to continue aspects of the one-year waiver that allowed them to use controlled semiconductor equipment containing American technology in China. Although Estevez didn’t give many details, he said the agency may continue authorizing at least some of their activities.

“What it will likely be is a cap on the levels that they can grow to in China,” he said. “So if you're at whatever layer of NAND [flash memory chips], we’ll stop it somewhere in that range.” The October controls imposed new license requirements for items destined to fabs in China that met certain thresholds, including NAND flash memory chips with 128 layers or more.

Estevez stressed that the agency is “working with those companies on the way forward there,” and the restrictions that BIS decides on “will depend on what the Chinese are doing, too. But we are in deep dialogue with the companies around that.”

Estevez said BIS worked closely with South Korea before it put out its October controls and plans to continue that coordination. “Korean companies that are here, they are operating in China. And we worked with them to ensure that we weren't going to harm our allies’ companies at the same time we were going to impede the Chinese capability,” Estevez said. “And I think we're going to be successful in that.”

He also pointed to the U.S. and South Korea export control working group launched in November (see 2211090020). “There’s work to be done there,” Estevez said. “It’s a great partnership, so we're looking for good things out of that.”