The US Department of Commerce is evaluating the potential revocation of authorizations granted to Samsung, SK Hynix, and TSMC for receiving US goods and technology at their facilities in China.

This could complicate operations for these companies, which manufacture semiconductors for various industries.

A White House official described the plan as a contingency if the current trade agreement with China collapses.

The official added there is currently no intention to implement the measure and expressed hope the agreement will proceed as planned.

The authorizations fall under the Validated End User (VEU) program, which allows approved entities to receive designated US-controlled products without multiple export licenses.

These permissions, issued in 2022 and later updated, come with equipment restrictions and reporting requirements.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ US-China semiconductor tensions risk creating “death spiral” for American companies

The potential revocation of authorizations comes amid a series of escalating trade measures that have significantly impacted the semiconductor industry since 2022.

Previous export controls in 2022 caused US semiconductor firms to experience revenue losses and employment drops due to denied licenses for selling to Chinese firms, as documented by the Federal Reserve Bank of New York 1.

These ongoing restrictions create what experts call a potential “death spiral” where export controls reduce US firm competitiveness, leading to less investment in R&D and further competitive decline 1.

This latest move could compound these effects, particularly given China’s status as the world’s largest semiconductor market, accounting for 31.4% of global semiconductor purchases in 2022, with US firms previously capturing 53.4% of that market 1.

The industry sources quoted in the original article who called this move “a gift” to Chinese competitors align with documented patterns where restrictions have actually galvanized China’s industrial policy, leading to increased domestic investments in semiconductor capabilities 1.

2️⃣ Tariffs and restrictions create complex supply chain ripple effects

Even modest tariff changes can have significant impacts on semiconductor manufacturing economics, with research showing that a 1% tariff hike on chip materials could raise fabrication facility construction costs by 0.64% 2.