Eased Restrictions on Individual Import Approvals
Annual Equipment Export Quota Introduced
Instead of Revoking "Validated End-User" Status
The U.S. government has decided to partially ease restrictions on the export of equipment to Chinese factories operated by domestic semiconductor companies such as Samsung Electronics and SK Hynix. This move allows them to avoid the worst-case scenario of having to obtain individual approval for every equipment import.
According to the industry on December 30, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) has changed its policy regarding Korean semiconductor companies' factories in China. Instead of revoking their "Validated End-User (VEU)" status, the BIS will now approve annual export volumes of equipment, thereby permitting exports through this new system.
With this measure, Samsung Electronics and SK Hynix will be able to significantly reduce the risk of production disruptions caused by delays in importing equipment for their Chinese factories. The industry assesses that the worst-case scenario-requiring approval for each individual equipment import-has been avoided. The companies have secured some leeway to maintain stable operations of their NAND flash and DRAM production lines in China. However, the import of equipment for factory expansion or process upgrades remains restricted, meaning there are still limitations on their medium- to long-term investment strategies.
Samsung Electronics NAND flash factory exterior in Xi'an, Shanxi Province, China. Samsung Electronics
The VEU is an exceptional status that allows the supply of U.S.-made equipment without separate approval procedures or time restrictions, as long as certain security conditions are met. Until now, Samsung Electronics’ NAND factory in Xi'an, SK Hynix’s DRAM factory in Wuxi, and NAND factory in Dalian had been recognized by the U.S. government as VEUs, enabling them to import U.S. equipment without significant regulation. However, at the end of August, the BIS announced it would remove the three Chinese subsidiaries operating these factories from the VEU list.
This measure was scheduled to take effect 120 days after its publication in the official gazette, starting December 31. If implemented as planned, domestic companies’ factories in China would have been required to obtain individual U.S. government approval for every import of U.S.-made equipment from December 31 onward.
However, with the U.S. government’s decision to ease restrictions, a new system will be introduced that requires separate approval on an annual basis. Companies will apply in advance for the types and quantities of semiconductor equipment and parts they need each year, and the U.S. government will determine export approval through a review process. While this is more stringent than being included in the VEU list, which grants comprehensive export approval, it is considered less burdensome in terms of operations than having to obtain individual approval for every equipment import.
The U.S. government estimated that, with the removal of VEU status for Samsung Electronics and SK Hynix’s Chinese factories, the number of annual approvals required would reach 1,000. Even if annual equipment exports are allowed, the policy of prohibiting the export of equipment for the expansion or upgrade of factories in China will remain in place.
An industry official stated, "It is unfortunate that there is a set period, but the lack of uncertainty during the approval period is a significant positive. Concerns related to the operation and investment in Chinese factories have been somewhat alleviated." However, he added, "U.S.-China tensions are expected to intensify further in the era of AI supremacy, and since NAND is produced in China, we cannot be entirely relieved."
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