Samsung Electronics and SK Hynix will be able to maintain and upgrade their manufacturing facilities in China – albeit only slightly – even after Washington’s proposed rules aimed at preventing U.S. subsidies from being used in China are implemented, South Korea’s trade ministry said on Wednesday.
The U.S. Department of Commerce announced on Tuesday that it would limit recipients of Chips and Science Act funding from investing in expanded semiconductor manufacturing in “relevant countries,” including China and Russia.
But the restrictions are not a complete ban on investment in China, as the sector allows recipient companies to expand capacity by 5 percent for advanced chips and by 10 percent for chips made using relatively older manufacturing processes.
The Ministry of Trade, Industry and Energy, after reviewing details of the so-called chip guardrail and the science bill passed last year,“When upgrading technology, chipmakers can increase the number of chips per wafer by increasing density, which translates into capacity expansion,” it said in a statement released on Wednesday.
With the expansion of Samsung Electronics’ manufacturing park in Xi’an, China, the site is responsible for supplying about 40% of Samsung’s NAND flash memory products.
SK Hynix’s factory in Wuxi, China, produces 96-layer and 144-layer NAND flash memory and about 40 percent of DRAM.
The two chipmakers said they were thoroughly reviewing the details of the proposed rule.
“We have been in close discussions with relevant government agencies in the U.S. and South Korea and plan to determine our next steps after reviewing the details of today’s announcement,” Samsung Electronics said in a statement. A source in the semiconductor industry said , the decision helped the South Korean chipmaker avoid the worst.
“There had been concerns that the two companies might be forced to close their chip factories in China, following initial media reports that the U.S. would impose a 10-year ban on the expansion of chip factories in China,” the source said.
Still, the companies face difficulties keeping their facilities running and keeping them up to date with the latest technology due to the many restrictions imposed by the US on the Chips and Science Act.
In October, the Commerce Department asked companies to provide their factories in China with the technology to make DRAM memory chips rated at 18 nanometers or smaller and NAND flash memory chips with 128 layers or more, and to obtain approval from the U.S. government.
Samsung Electronics and SK Hynix received a one-year exemption from the October rule.
Meanwhile, the South Korean Legislative Council agreed to introduce a bill aimed at increasing tax incentives for semiconductor manufacturing facilities in South Korea. Lawmakers will vote at a plenary session scheduled for March 30.
The amendment would give large companies a tax credit of up to 15 percent for semiconductor manufacturing investments, up from 8 percent previously. For SMEs, this ratio will be raised to 25 percent from the current 16 percent.