New U.S. restrictions could prevent leading chip manufacturers from installing chipmaking tools in their China fabs. The U.S. government is considering cancelling the validated end-user (VEU) program for multinational chipmakers, which would adversely affect companies such as Samsung, SK hynix, and TSMC, which operate fabs in China. This decision by the U.S. depends on whether the announced trade deal with China fails, Reuters reports citing people familiar with the matter. There are no revokes of VEUs, as yet, but the government has this in place as a just-in-case scenario.
For now, the U.S. government is reportedly conducting a study and 'laying the groundwork' for a scenario if China and the U.S. fail to sign the expected trade agreement. The review targets special trade allowances for multinationals that were given to select non-China-based chipmakers after the U.S. imposed export restrictions on fab tools exported to China in late 2022.
When the Biden administration imposed export controls on advanced fab tools originating in the U.S., essentially barring their sales to entities in China, it granted the so-called VEU authorizations to Samsung, SK hynix, and TSMC to let them obtain semiconductor production equipment for their fabs in China without an export license. This applied as long as they did not supply China's military or secret services.
The VEU streamlined the process for American companies — including but not limited to Applied Materials, KLA, and Lam Research — to ship to their Chinese customers, which had bought tens of billions worth of fab equipment in recent years.
VEUs for the major memory makers reduced delays and provided predictability, but they obviously came with specific terms such as limits on equipment types and mandatory reporting. According to someone familiar with the situation cited by Reuters, these conditions still allowed the companies to operate efficiently even given the framework.
A White House official explained to Reuters that the move is part of a precautionary tactic, as the U.S. is preparing in case the current trade agreement with China collapses or another dispute arises. Though there are currently no plans to revoke the authorizations, officials want the option available if bilateral relations take a nosedive. The same official expressed confidence that the existing trade deal would hold, including Chinese deliveries of rare earth materials.
A spokesperson from the U.S. Commerce Department confirmed to Reuters that semiconductor firms would still be able to conduct business in China even if the permissions were pulled. Any future enforcement actions would align foreign multinationals with the same licensing obligations currently applied to U.S. exporters. The intent is to create a uniform system rather than target specific firms.
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