Chinese Producers Shift to Second-Hand Semiconductor Equipment Amid Sanctions
Amid heightened U.S. sanctions, the success of China’s semiconductor industry is often attributed to Chinese chip manufacturers’ ability to source necessary equipment from the secondary market. However, fearing possible sanction repercussions, South Korean producers Samsung and SK Hynix have ceased selling old equipment.
The Financial Times reported that Samsung and SK Hynix started storing old chip-making equipment rather than sending them for resale. These Korean producers worry about their equipment landing in the hands of customers that are not favourable in terms of American sanctions and could result in adverse consequences for Korean companies.
The Korean chipmakers began accumulating used equipment from 2022, as the U.S. started tightening export control rules for the semiconductor industry. A South Korean trader indicated the possibility of Chinese buyers of used equipment redirecting it to Russia, raising fears of secondary US sanctions and leading Korean equipment owners to withhold their sales. Especially, as Samsung and SK Hynix manage to receive concessions for shipments of new equipment to their Chinese plants, while other companies are required to obtain export licenses from the U.S. Department of Commerce.
Usually, Samsung and SK Hynix update their technology equipment frequently, thus freeing up large quantities of production resources. These pieces of equipment are keenly purchased by Chinese firms for the manufacturing of electronic components via mature processes. According to market participants, even ten-year-old equipment can be reconditioned and upgraded for producing chips utilizing relatively modern technology.
Sources disclosed that SK Hynix resumed the sales of some of its stored used equipment as it ran out of storage space. However, it continues to withhold the sales of used American equipment to prevent potential sanctions. Korean manufacturers also retain their used equipment within China in case they might need it following likely tightened U.S. export control rules that would compromise their ability to import newer equipment. Witnesses state that hundreds, or even thousands, of units of used equipment worth a total of a few million U.S. dollars, are stored in the warehouses of Korean memory manufacturers.
