South Korea says chip rules will not force China factories

The trade ministry of South Korea said on Wednesday that the United States proposed rules to prevent $52 billion in chip funding from being used by countries of concern will not force recipients to shut down their China factories.

The U.S. Commerce Department has proposed limits for recipients of U.S. chip manufacturing and research funding, including limits on investing in expansion in countries such as China and Russia.

Samsung Electronics and SK Hynix, the world's largest memory-chip makers, have chip production facilities in China.

Samsung is building a chip plant in Texas that could cost more than $25 billion, while SK Hynix parent SK Group announced last year plans to invest $15 billion in the U.S. chip industry. The trade ministry said that the proposed rules for funding recipients limit chip production capacity growth in China to 5% over 10 years, as measured by wafers, and 10% for older legacy chips.

The ministry added that they do not restrict investments in technology and process upgrades, or equipment replacement necessary for the operation of existing facilities.

The trade ministry said in a statement that maintenance and partial expansion as well as technology upgrades will be possible for the production facilities our companies are operating in China. Chips per wafer can be increased as technology is upgraded. It is possible that production could be expanded based on corporate strategies. The South Korean government plans to communicate with the local industry, analyze proposed rules, and consult with U.S. counterparts within 60 days, the ministry said.

An industry source said that there was uncertainty if the one-year waiver for Samsung and SK Hynix expires in October, and that the one-year waiver for the chip equipment needed in China expires in October.

The details of the announcement will be reviewed by Samsung and SK Hynix.

The ministry said that Samsung's plan to invest $230 billion in South Korea over 20 years to develop a large chip-making base was in line with uncertainties in investing in China or the United States.