China is encouraging chipmakers to use more locally produced equipment to reduce their reliance on foreign technology.
Leading global tech companies Samsung Electronics and SK Hynix have received an annual license from the US government, permitting them to import chipmaking tools to their Chinese-based facilities in 2026.
Two individuals with knowledge of the license decide to weigh in on the situation.
They released a statement dated Tuesday, December 30, noting that the South Korean firms feel a temporary relief following the US government’s move, which came in after issuing an order earlier this year mandating the cancellation of license waivers that some tech companies had secured.
Washington has recently acknowledged that it has created an annual approval process designed to permit the export of chipmaking equipment to China, according to a source familiar with the situation.
Regarding this announcement, reports mentioned that Samsung, SK Hynix, and TSMC were previously granted exemptions, known as validated end-user status, from the restrictions imposed on chip-related exports to China by the US. As of December 31, the validated end-user status will be terminated.
Immediately after this termination, the shipment of American chipmaking equipment to the firms’ Chinese-based facilities will necessitate that the companies obtain US export licenses.
As the situation became more intense, reporters reached out to the tech firms for comment on the topic of discussion. However, Samsung, SK Hynix, and TSMC decided not to respond. They also pointed out that the US Department of Commerce claimed to be unavailable for comments outside office hours.
On the other hand, a reliable source reported that the US President Donald Trump’s administration has been reconsidering export controls that were previously deemed loose during the Biden administration. This effort demonstrates the administration’s heightened concern regarding restricting China’s access to US-based advanced technology.
In the meantime, as Samsung Electronics and SK Hynix received an annual license from the US government, reports dated December 30 highlighted that China is requesting chipmakers to utilize at least 50% of their equipment developed in the country, which would add new production capacity to their operations. This update is part of Beijing’s broader efforts to establish a self-reliant semiconductor supply chain.
Although this regulation is not yet officially documented, three individuals knowledgeable about the situation have hinted that the Chinese government took the initiative to inform chip manufacturers seeking government approval to construct or expand third facilities that they are required to illustrate, via procurement bids, that at least half of their tools will be derived from the country.
Following the Chinese government’s recent efforts to establish a self-reliant semiconductor supply chain, sources have noted that the instructions issued to chipmakers based in China mark one of the most crucial steps Beijing has taken to reduce its reliance on foreign technology.
China welcomed this decision following the US introduction of strict export restrictions on cutting-edge AI chips and semiconductor tools in 2023, which prohibited the sale of advanced equipment to China.
While this limitation prohibited the sale of some advanced equipment, the 50% regulation sparks hope for Chinese chipmakers by encouraging them to choose local suppliers at a time when foreign tools from the US, Japan, South Korea, and Europe remain an alternative.
Insiders told reporters that applications that fail to comply with this standard are typically rejected; however, authorities can be flexible if they spot an issue with supply. It is worth noting that these rules are relaxed for advanced chip production lines, as domestic equipment is not yet fully developed.
Another source commented that, “Officials prefer the rule to be much higher than 50%. In the end, they want factories to use 100% homegrown equipment.” The sources wished to maintain anonymity due to the confidential nature of the situation.
Meanwhile, this effort aligns with President Xi Jinping’s calls for all national efforts towards a fully developed, self-reliant semiconductor supply chain. Thousands of engineers and scientists are working in various firms and research centers across the country as part of this project.
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