US scrambles to avoid supply chain chaos after China export curbs

The United States is scrambling to tackle the unintended consequences of its new set of export curbs on China’s chip industry that could inadvertently harm the semiconductor supply chain, people familiar with the matter have said.

Hours before the new restrictions took effect, South Korean memory chipmaker SK Hynix said the US had granted it authorisation to receive goods for its chip production facilities in China without additional licensing imposed by the new rules.

Separately, the Taiwan Semiconductor Manufacturing Company (TSMC) secured a one-year license to continue ordering US chipmaking equipment for its expansion in China, Nikkei Asia reported on Thursday.

The US government assured TSMC the company would be able to ship the equipment to a manufacturing facility in the Chinese city of Nanjing, the Nikkei report said, citing people familiar with the matter. TSMC did not immediately respond to a request for comment.

US President Joe Biden’s administration had planned to spare foreign companies operating in China, such as SK Hynix and Samsung Electronics Co, from the brunt of its new restrictions, but the rules published Friday did not exempt such firms.

As published, the rules require licenses before US exports can be shipped to facilities with advanced chip production in China, as part of a US bid to slow China’s technological and military advances.

And as of midnight Tuesday, vendors also could not support, service and send non-US supplies to the China-based factories without licenses if US companies or people were involved.

As a result, even basic items like light bulbs, springs and bolts that keep tools running may not be able to be shipped until vendors were granted licenses. And without the minute-by-minute support the foundries needed, they could begin shutting down, one source said.

“Our discussions with the Department of Commerce led to an approval to supply equipment and items needed for development and production of DRAM semiconductors in Chinese facilities without additional licensing requirements,” SK Hynix said in a statement.

The company said the change would help avoid disruptions to the supply chain and that the authorisation is for one year.

Samsung Electronics declined to comment.

Another source said the temporary fix was until a longer-term solution could be worked out.

A US Commerce Department spokesperson did not directly respond to a request for comment on the authorisations but said the department hopes to get input from stakeholders about the rule and may consider changes.

A White House spokesperson also did not respond to a request for comment.

“Unless the authorisation was issued, a variety of equipment and other suppliers would have had to pull their personnel from the fabs in China,” one of the sources said.

The US planned to review licenses for non-Chinese factories in China hit by the new restrictions on a case-by-case basis, but even if approved, that could create delays in shipments. Licenses for Chinese chip factories are likely to be denied.

Intel Corp also operates chip factories in China.

Chinese chip facilities are not expected to get any reprieve.