"WASHINGTON -- The Biden administration plans to allow top semiconductor manufacturers from South Korea and Taiwan to maintain and expand their existing chip-making operations in China without U.S. reprisals, according to recent remarks by a senior Commerce Department official.
Some analysts say the move will weaken U.S. export controls designed to slow China's technological advance.
Alan Estevez, undersecretary of commerce for industry and security, told an industry gathering last week that the administration intended to extend existing exemptions from a U.S. export-control policy designed to restrict companies from selling chips and chip-making equipment to China, according to several attendees.
Last October, the U.S. implemented curbs on China's semiconductor sector but it also provided one-year exemptions to several companies -- including South Korea's Samsung Electronics and Taiwan Semiconductor Manufacturing -- that have invested billions of dollars to build plants in China.
Those exemptions were set to expire in October. Estevez told a meeting of the Semiconductor Industry Association, a trade group, that the exemptions would be renewed for the foreseeable future, according to the attendees. The Commerce Department declined to comment.
The status of the exemptions was closely scrutinized by companies and foreign governments to see how strictly the U.S. export curbs would affect investments in China beyond the fall.
The move to extend the exemptions, rather than winding them down, amounts to a recognition by U.S. authorities that efforts to isolate China from high-tech goods are more difficult than anticipated in a highly integrated global industry, according to industry executives. It also comes as some foreign businesses bristle at Washington's expanding interference in their operations.
The U.S. has sought to keep advanced chips out of Chinese hands by limiting the exports of chips and related chip-making equipment not only by American manufacturers but also those made by allies.
The U.S. has influence over Korean and Taiwanese chip makers because the companies rely on technology and equipment developed or manufactured by companies from the U.S., as well as from the Netherlands and Japan, where the governments have agreed to join the U.S. export-control efforts.
U.S. and foreign chip makers have resisted U.S. efforts to limit their business with China. Asian and European governments have also pushed back. The most vocal criticism has come from South Korea. China is by far its largest export market. Seoul, a close U.S. military and economic ally, is also careful not to anger Beijing, which has strong influence over North Korea.
U.S. officials in recent weeks said the U.S. doesn't seek to decouple from China. National security adviser Jake Sullivan said in an April speech that Washington's strategy is to limit restrictions to highly strategic technologies with "a small yard, high fence." Treasury Secretary Janet Yellen has said in speeches that a full separation from China's economy would be disastrous for both countries.
Others in Washington, particularly Republican lawmakers, want tougher stances on China. Sen. Marco Rubio (R., Fla.), in a May 30 letter, urged Commerce Secretary Gina Raimondo to strengthen the U.S. controls over technology exports, including chips: "Companies are hard at work to weaken and circumvent the rule's export controls."
Samsung, for one, has said it has curtailed some of its operations in China. A Samsung spokeswoman said the company only produces memory chips in China that don't require the most advanced technology, which she said was a business decision unrelated to geopolitical concerns.
The U.S. is also pressuring Asian manufacturers to curb their operations in China through the $53 billion Chips and Science Act. While wooing Samsung and TSMC with the program's incentives to build plants in the U.S., Washington has laid out expectations that such money would be awarded in exchange for companies limiting investment in China. Both chip makers have resisted such efforts.
The South Korean government and companies have asked the U.S. to reconsider those restrictions." [1]
1. U.S. News: U.S. Eases Stance on Chip Makers in China --- South Korea, Taiwan firms get green light to operate, expand without reprisals. Hayashi, Yuka.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 13 June 2023: A.2.