The U.S. government will let top chipmakers Samsung, SK Hynix, and TSMC keep and expand their existing memory and logic fabs in China, according to a report from the Wall Street Journal that cites an official from the U.S. Department of Commerce. If the information is correct, then the three companies will be able to purchase new fab tools from U.S.-based makers for their Chinese fabs, but there is a catch.
Alan Estevez, undersecretary of the Department of Commerce for industry and security, revealed plans for the administration to continue current waivers for the South Korean and Taiwanese chipmakers relating to the latest U.S. export control rules designed to constrain capabilities of the Chinese semiconductor industry. These waivers, originally granted last October, were due to expire this October.
The confirmation was given by Estevez during a discussion with the Semiconductor Industry Association stating the waivers are projected to persist for the 'foreseeable future,' according to those present at the discussion. However, the Commerce Department chose to withhold any additional remarks on this matter.
Manufacturers of wafer fab equipment (WFE) from the U.S. must obtain an export license from the Department of Commerce before exporting tools capable of producing logic chips with non-planar transistors on nodes measuring 10nm/14nm/16nm or smaller, 3D NAND chips featuring 128 or more layers, and DRAM ICs with a half-pitch of 18nm or less to customers in China.
Chipmakers like Samsung, SK Hynix, and TSMC have to upgrade their fabs often to keep their products competitive. All three received waivers from the U.S. government allowing them to export necessary production equipment to China from October 2022 to October 2023. with a possibility to extend their waivers for another year. Apparently, the U.S. government is now willing to allow Samsung, SK Hynix, and TSMC to get American wafer fab tools for their semiconductor production facilities in China beyond October, 2024.
But let's get to that catch. The conditions for receiving state funding under the U.S. CHIPS and Science Act will prohibit beneficiary companies from investing in their fabs located in China. This policy could profoundly impact international firms like Samsung, SK Hynix, and TSMC, which operate significant facilities in China and are prospective applicants for the U.S. funding. Should any of those companies obtain CHIPS money, they will not be able to invest in expansion or upgrades of their fabs in China for 10 years, according to the current terms.
At present, SK Hynix is the sole producer of DRAM in China. It is unclear which production technologies it uses there. Both Samsung and SK Hynix fabricate 3D NAND in China using their 128-layer process, according to TrendForce. Meanwhile, TSMC's Fab 16 in Nanjing, Jiangsu Province, China, produces chips on the company's 16nm FinFET nodes.
For now, 16nm FinFET and 128-layer 3D NAND fabrication processes are competitive. But at some point, they are going to become obsolete and if chipmakers there cannot invest in upgrades of their Chinese fabs in accordance with their agreements with the U.S. government, they will have to make strategic decisions about them if the terms of the grants under the CHIPS act do not change.
