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Samsung Electronics (OTCPK:SSNLF) and SK Hynix have blocked sales of used chip-making equipment for fear of U.S. backlash over export curbs on China and Western sanctions on Russia . Financial Times reported.
The two South Koreans Chip companies store used machines in warehouses and do not offer them for sale on the secondary market, says report added quoting three dealers in second-hand chip-making tools.
“We are worried [the equipment] it could fall into the wrong hands and that could cause problems in our relationship with the U.S. government,” a person close to one company said.
Companies began warehousing old machines in 2022, after the United States introduced rules to limit the export of chips and advanced equipment to China. The restrictions have made it harder for Chinese companies to access the machines needed to make the most powerful chips, such as those needed to make artificial intelligence products.
“Some Chinese buyers have sold tools to Russia [the chipmakers] they fear a negative reaction from the United States as well,” a second-hand tool dealer based in South Korea said, according to the report.
The US has urged allies in Europe and Asia to tighten the brakes especially after Huawei Technologies surprised many in August 2023 by quietly launching its new phone, Mate 60 Pro which reportedly has a 5G-capable chip .
The phone required evaluation by the United States to know the details of the internal chip, which is the most advanced semiconductor China has produced so far. However, last week, it was reported that Huawei and its partner Semiconductor Manufacturing International (OTCQX:SIUIF) were dependent on US technology to produce the advanced 7-nanometer chip for Huawei last year.
South Korean semiconductor companies usually bundle used equipment into parcels before selling it to dealers who put it up for sale at auctions. The biggest demand comes from China, where many chipmakers aim to produce older generations of chips used in household appliances and cars.
Equipment that is no longer needed by South Korean companies can be refurbished and reinstalled in Chinese factories, usually to produce less advanced chips not covered by US restrictions, according to a used equipment seller based in Japan, the report added.
However, even 10-year-old second-hand machines, such as lithography equipment used to “print” transistors on logic and memory chips, could be used to produce advanced chips after repair, the seller noted.
Recently, SK Hynix started selling some machines again after running out of storage space, the report added, citing a person familiar with the matter. However, according to the report, the Korean company continued to refrain from selling equipment made in the United States.
Samsung and SK have memory chip factories in China, which account for about half of their production capacity. Both companies have been granted indefinite waivers by Washington allowing them to send U.S. chip-making tools to China to service their Chinese facilities.
Companies are also holding onto their used machines in China over concerns that could occur if the Biden administration further tightens export controls, forcing them to use less sophisticated equipment.