US scrambles to prevent export curbs on China chips from disrupting supply chain

The US is scrambling to tackle unintended consequences of its new export curbs on China's chip industry that could inadvertently harm the semiconductor supply chain, people familiar with the matter said.

Hours before a new restriction took effect, South Korean memory chipmaker SK Hynix Inc said it got authorisation from the US to receive goods for its chip production facilities in China without additional licensing imposed by the new rules.

Separately, Taiwan Semiconductor Manufacturing Co secured a one-year licence to continue ordering American chipmaking equipment for its expansion in China, Nikkei Asia reported on Thursday.

The US government assured TSMC that it will be able to ship the equipment to a manufacturing facility in the Chinese city of Nanjing, Nikkei report said, citing people familiar with the matter. TSMC did not immediately respond to Reuters' request for comment.

The Biden administration had planned to spare foreign companies operating in China such as SK Hynix and Samsung Electronics Co from the brunt of new restrictions, but the rules published Friday did not exempt such firms.

As published, the rules require licences before US exports can be shipped to facilities with advanced chip production in China as part of a US bid to slow China's technological and military advances.

And as of midnight Tuesday, vendors also could not support, service and send non-US supplies to the China-based factories without licences if US companies or people are involved.

As a result, even basic items like light bulbs, springs, and bolts that keep tools running may not have been able to be shipped until vendors are granted licences. And without the minute-by-minute support the foundries need, they could begin shutting down, one source said.

"Our discussions with the Department of Commerce led to an approval to supply equipment and items needed for development and production of DRAM semiconductors in Chinese facilities without additional licensing requirements," SK Hynix said in a statement.

The company said the change would help avoid disruptions to the supply chain and that the authorisation is for a year.

Samsung Electronics declined to comment.

Another source said the temporary fix was until a longer-term solution could be worked out.

A US Commerce Department spokesman did not directly respond to a request for comment on the authorisations, but said the department hopes to get input from stakeholders about the rule and may consider changes.

A White House spokesman also did not respond to a request for comment.

"Unless the authorisation was issued, a variety of equipment and other suppliers would have had to pull their personnel from the fabs in China," one of the sources said.

The US planned to review licences for non-Chinese factories in China hit by the new restrictions on a case-by-case basis, but even if approved that could create delays in shipments. Licences for Chinese chip factories were likely to be denied.

Intel Corp also operates chip factories in China.

Chinese chip facilities are not expected to get any reprieve.