Key Highlights
- The U.S.’s VEU designation for Samsung and SK hynix in China is set to expire on December 31, 2025.
- The companies have avoided the worst-case scenario as equipment shipments will now be subject to an annual review system.
- This change could require up to 1,000 export approvals annually, introducing operational uncertainties for Samsung and SK hynix.
- Despite the new system, U.S. policy remains unchanged, prohibiting equipment exports for plant expansions or upgrades in China.
The Expiration of VEU Designation: A Turning Point for Korean Semiconductor Giants
Samsung Electronics and SK hynix have managed to escape the worst-case scenario as the U.S. Commerce Department’s Validated End User (VEU) designation for their Chinese facilities is set to expire on December 31, 2025. However, this does not mean they are completely out of the woods.
New Annual Review System
According to reports from Hankyung, the companies have navigated a path that allows them to avoid the most severe restrictions. Instead of indefinite authorizations, equipment shipments will now be subject to an annual review process under the new site license plan proposed by the U.S. Commerce Department.
Under this system, companies like Samsung and SK hynix must pre-submit their plans for the types and quantities of semiconductor equipment they need for the upcoming year.
The U.S. government will then review these requests to grant export approvals. While this reduces some risk compared to a full VEU revocation, it introduces significant operational uncertainties.
Operational Uncertainties
The annual review system could require up to 1,000 export approvals annually for Samsung and SK hynix’s Chinese facilities. This number alone underscores the potential complexity and logistical challenges that lie ahead. Industry observers warn that companies may struggle to accurately forecast their equipment needs due to the frequent revisions in this process.
Moreover, the new system does not alter Washington’s stance on prohibiting equipment exports for plant expansions or upgrades in China. This means that while Samsung and SK hynix can continue producing at their existing facilities, they are likely to focus more on maintaining yields on legacy processes rather than upgrading their infrastructure.
Impact on Chinese Operations
The Chinese operations of Samsung and SK hynix play a significant role in the global semiconductor landscape. According to TrendForce, around 30-35% of Samsung’s total NAND output is expected to come from China in 2025, while for SK hynix, roughly the same share of its DRAM output will be produced there. The Dalian facility alone turns out about 100,000 wafers monthly, and the Xi’an plants produce an estimated 270,000 NAND wafers per month.
Notably, SK hynix’s Wuxi factory is not expected to undergo major process transitions in 2026. Instead, it will continue producing legacy DRAMs such as 1z and 1a while reserving cutting-edge lines like 1b and 1c for its Icheon and Cheongju facilities.
Survival Strategy
As a result of the new U.S. policy, Korean chipmakers are pivoting from expansion to survival in China. This means they will prioritize yield optimization on legacy processes over further fab upgrades. The move reflects a strategic adjustment aimed at navigating the increasingly complex and restrictive trade environment.
In conclusion, while Samsung and SK hynix have managed to avoid the most severe impacts of VEU revocation for now, the future remains uncertain as they navigate the new annual review system and U.S. restrictions on equipment exports. The ongoing tension between global economic interests and geopolitical considerations will continue to shape their operations in China.
