The U.S. Department of Commerce is considering revoking special authorizations that allow global chipmakers—including Samsung Electronics, SK Hynix, and Taiwan Semiconductor Manufacturing Company (TSMC)—to receive American technology at their facilities in China. The potential move could complicate operations for these firms, which produce semiconductors in China for a variety of global industries.
While no decision has been made, sources familiar with the matter said the discussions reflect growing concern about U.S.-China tech tensions. The revocation would represent a significant tightening of export controls, particularly as U.S. officials look to safeguard national security interests and maintain leverage amid ongoing geopolitical friction.
Preparing for Worst-Case Scenarios
A White House official told reporters that the U.S. government is merely “laying the groundwork” for potential trade deterioration between the two countries. The official added that the administration remains confident in the current agreement with China, which includes commitments to maintain the flow of critical materials like rare earth elements.
“There is currently no intention of deploying this tactic,” the official said. “It’s another tool we want in our toolbox in case either this agreement falls through or any other catalyst throws a wrench in bilateral relations.”
Market Reaction Reflects Investor Concerns
News of the potential revocation—first reported by The Wall Street Journal—sent ripples through financial markets on Friday. Shares of U.S.-based chip equipment makers, which count Chinese fabs among their major customers, dropped amid investor fears of disrupted sales. KLA Corp fell 2.4%, Lam Research slipped 1.9%, and Applied Materials declined by 2%. In contrast, shares of Micron Technology, a key U.S. competitor to Samsung and SK Hynix in the memory chip sector, rose 1.5%.
Background on VEU Authorizations
In October 2022, the U.S. implemented sweeping restrictions on the export of semiconductor equipment to China. To accommodate allied chipmakers, the Commerce Department granted special letters of authorization to Samsung, SK Hynix, and others—allowing them to continue receiving U.S. technology and tools for their operations in China.
These exemptions were formalized in 2023 and 2024 through a status known as "Validated End User" (VEU). VEU designation allows select companies to bypass lengthy licensing processes, enabling faster and more reliable access to designated U.S. goods.
However, these privileges come with conditions—including limitations on specific equipment and stringent reporting requirements. If revoked, chipmakers would be subject to standard licensing restrictions, likely slowing or complicating their operations.
Strategic Implications for the Chip Industry
According to a Commerce Department spokesperson, any future enforcement actions would mirror existing licensing frameworks applied to other firms exporting to China. “The new enforcement mechanisms on chips mirror licensing requirements that apply to other semiconductor companies… and ensure the United States has an equal and reciprocal process,” the spokesperson said.
Industry observers caution that revoking VEU privileges could have unintended consequences. Some sources argued it might actually benefit Chinese semiconductor firms by weakening foreign competitors operating within China. “It’s a gift,” one source noted, suggesting that domestic Chinese firms could capitalize on the regulatory headwinds facing foreign players.
While no immediate action has been taken, the potential revocation of VEU status for key global chipmakers underscores the fragility of U.S.-China tech relations. As Washington balances trade enforcement with geopolitical strategy, chipmakers with operations in China are once again caught in the middle of an intensifying rivalry.