**U.S. Commerce Department Proposes New Approval System for Semiconductor Shipments to China**
The U.S. Department of Commerce is contemplating a shift from its previously flexible regulations regarding semiconductor equipment shipments to Chinese factories operated by Samsung Electronics Co. and SK Hynix Inc. According to a report, the department is considering implementing a new system that would require annual approvals for these shipments. This change indicates that the previously available permanent comprehensive status will no longer be an option.
While the worst-case scenario—requiring individual approvals for each piece of equipment shipped to Chinese plants—has been avoided, the proposed “site license” system is set to introduce stricter regulations. Under this new framework, companies like Samsung and SK Hynix would need to submit detailed annual lists of the equipment, components, and materials they require, obtaining U.S. government approval on a yearly basis.
This proposed system is more stringent than the Validated End-User (VEU) program, which previously allowed indefinite comprehensive approval for importing equipment into China. The VEU status for Samsung and SK Hynix was revoked by the Trump administration after approximately three years, as it was viewed as a regulatory loophole.
The introduction of the site license system, while more complex than the VEU, is perceived as a practical compromise that enables Korean semiconductor companies to maintain operations in their Chinese facilities. The U.S. Commerce Department’s discussions with South Korea last week highlighted this new approach, which aims to provide more predictability compared to the case-by-case approval process that could have required as many as 1,000 approvals annually for the two companies.
In summary, if the site license system is implemented, Korean chipmakers will be relieved from the burden of seeking approval for every equipment import, allowing them to continue their operations with greater certainty.
**FAQ**
**What is the proposed site license system for semiconductor shipments?**
The proposed site license system would require companies like Samsung and SK Hynix to submit annual lists of necessary equipment and obtain U.S. government approval each year, replacing the previously more flexible VEU program.
