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TSMC, Samsung seeking permanent US licenses to operate China chip plants

Aerial photo taken at night shows the TSMC plant area in Nanjing, Jiangsu province.
Enlarge / Aerial photo taken at night shows the TSMC plant area in Nanjing, Jiangsu province.

The US Commerce Department announced today that key foreign chipmakers can continue receiving critical US chipmaking tools at China-based plants, Reuters reported.

This decision extends special authorizations that were granted to foreign chipmakers—including South Korea’s SK Hynix and Samsung, as well as the Taiwan Semiconductor Manufacturing Co (TSMC)—after the Biden administration curbed shipments of advanced chips and chipmaking equipment to China last October.

Those export controls were intended to slow down China’s rapid advancement of AI and military technologies, but the new rules also negatively impacted US chip production. To overcome those inadvertent impacts on US chip supplies, the Biden administration granted limited special authorizations to allow some chipmakers to continue shipping equipment into China. Now, those chipmakers will be able to continue operating Chinese plants “without the headache of applying for US licenses,” Reuters reported.

In a separate report, TSMC—which the US depends on as a supplier of chips for AI and military defense systems, the Center for Strategic and International Studies reported in 2022—told Reuters that “it expects to receive permanent US authorization for China operations.”

According to TSMC, the US Bureau of Industry and Security advised the leading global chip supplier to apply for the first time for a “validated end-user” (VEU) authorization to ensure that TSMC always has US approvals for its China-based operations.

“We expect to receive a permanent authorization through the VEU process,” TSMC’s spokesperson told Reuters.

South Korea’s government also confirmed that Samsung Electronics and SK Hynix “will be allowed to supply US chip equipment to their China factories indefinitely without separate US approvals,” Reuters reported.

The Commerce Department’s announcement comes as the Biden administration continues to struggle to cut off China from AI chips, Reuters reported. Four people familiar with the matter told Reuters that President Joe Biden is considering expanding export controls to close “a loophole that gives Chinese companies access to American artificial intelligence (AI) chips through units located overseas,” which have proven difficult for the US to police.

Sources told Reuters that this loophole allowed “overseas subsidiaries of Chinese companies… unfettered access” to restricted semiconductors that were “easily” being “smuggled into China or accessed remotely by China-based users.”

To address this, the next round of export controls would likely be similar to controls that the Biden administration implemented in August, sources told Reuters, which restrict shipments of AI chips and chipmaking tools to some countries in the Middle East, as well as other regions outside China. However, it’s unclear if that will help the US achieve its goal of fully cutting off China from US chipmaking tools. Experts told Reuters that even these extended restrictions seem to ignore how easy it is for Chinese parties to access AI capabilities remotely through cloud providers like Amazon Web Services.

In the past year, China’s Ministry of Commerce has protested Biden’s increasingly restrictive export controls, describing them as “unreasonable suppression of Chinese companies,” Reuters reported.

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