Washington: The U.S. Commerce Department announced a significant policy shift on Friday, stating that South Korean technology giants Samsung Electronics Co. and SK hynix Inc. will be required to obtain licenses for exporting specific U.S. chipmaking equipment to their Chinese plants. This change comes as the department plans to remove these companies from the "validated end-user (VEU)" status.

According to Yonhap News Agency, the Bureau of Industry and Security of the U.S. Department of Commerce will revise the current VEU authorizations list for China, also removing Intel Semiconductor Ltd. from the list. This decision is anticipated to impact the production volumes of these chipmakers within China. The VEU status, granted during the previous Biden administration, had lessened the licensing burden on Samsung Electronics and SK hynix by allowing them to ship certain U.S. semiconductor equipment to pre-approved sites under a general authorization rather than needing individual export licenses.

The policy change is slated to take effect 120 days following its official publication date of September 2nd. This move is part of the U.S.'s broader strategy to tighten export controls on advanced technologies to China amidst escalating competition between the two nations over technological supremacy, maritime security, and other areas.

In reaction to the U.S. decision, the South Korean government expressed its intent to mitigate the impact on its domestic chipmakers. The Ministry of Trade, Industry and Energy stated that Seoul was informed in advance about the U.S. government's decision to terminate the VEU status for Samsung and SK hynix.

"The government has been closely communicating with the U.S. Department of Commerce on possible adjustments to the VEU system, stressing the importance of smooth operations of our chipmakers' Chinese facilities for global semiconductor supply chain stability," the ministry said. "Even if VEU status is withdrawn, we will continue to work with the U.S. to ensure any impact on Korean companies is minimized."