Bloomberg reported on Monday (September 8) citing informed sources that the U.S. plans to implement annual approval for Samsung Electronics and SK Hynix's chip supply to China.

Last week, U.S. Commerce Department officials proposed a "site license" scheme to Korea, replacing the long-term authorization that Samsung and SK Hynix obtained under the Biden administration. These so-called "Verification of End User" (VEU) qualifications will expire at the end of this year. The VEU system had allowed the two companies to export specific quantities of semiconductor equipment and materials to their Chinese factories based on prior security and regulatory commitments.

The new proposal from the Trump administration requires Samsung and SK Hynix to reapply annually for specific quantities of restricted equipment. This move increases the approval process, but it is said to ensure continuity of business operations. Bloomberg noted that this plan has triggered mixed reactions in South Korea: the industry and government officials are relieved that the framework continues, but they are dissatisfied with the additional administrative burden.

Comments: Regardless of whether it was under Biden or Trump, the U.S. has continuously expanded export controls on China, aiming to curb China's capabilities in semiconductors and artificial intelligence.

Compared to the long-term VEU authorization under the Biden administration, the Trump administration's annual review is not a complete cut-off of supplies, but rather a more precise technological control through "annual review of quantities"—it avoids operational crises for Korean companies due to authorization interruptions while dynamically limiting the scale of chip equipment and material supplies to China, preventing technology from indirectly flowing into China's semiconductor industry through Korean companies' Chinese factories, further strengthening the technical "firewall" against China.

This plan appears to retain the "framework" for Korean companies' supply to China, but in reality, it strengthens the binding of Korean companies by increasing administrative costs and the uncertainty of approvals: if Korean companies want to maintain their Chinese market (a significant portion of their revenue), they must report annually to the U.S. government, effectively accepting U.S. intervention in their global operations. This approach of "providing a channel while imposing shackles" puts Korean companies in a passive situation where they depend on U.S. authorization to maintain their core businesses.

Original: www.toutiao.com/article/1842747168652291/

Statement: This article represents the views of the author.