Three bills to tighten semiconductor export controls gain momentum in U.S. Congress ... Could South Korean firms also be caught in the crossfire?

[Financial News]  

Three U.S. bills to tighten restrictions on semiconductor exports to China are gaining fresh momentum in Congress, the Wall Street Journal (WSJ) reported on the 11th (local time).
An affair scandal involving Jensen Huang, NVIDIA’s CEO, became the catalyst. The Information had previously reported on the 10th that Alice Huang, a former romantic partner of Jensen Huang who is suspected of being a Chinese spy, smuggled at least $7.5 billion (about 10 trillion won) worth of NVIDIA’s advanced artificial intelligence (AI) chips into China.

The WSJ reported that leading Republican and Democratic lawmakers are pushing to pass three bills strengthening semiconductor export controls—the AI Overwatch Act, the Semiconductor Security Act and the MATCH Act—by including them in the National Defense Authorization Act (NDAA).
The AI Overwatch Act would put exports of advanced AI chips to adversaries such as China under congressional oversight. The executive branch would have to notify Congress before approving exports, and Congress could block them.
The Semiconductor Security Act would require location-tracking devices to be attached to semiconductors to prevent advanced U.S. chips from being smuggled to China and other destinations via third countries.
The MATCH Act regulates semiconductor manufacturing equipment. It is designed to pressure allies such as Japan and the Netherlands to tighten controls to U.S. levels when exporting such equipment. The goal is to slow China’s semiconductor development. If allies fail to make progress within the set deadline of 150 days toward strengthening controls on exports of semiconductor manufacturing equipment to China in step with the United States, the U.S. could apply export restrictions to equipment produced in allied countries that uses U.S. technology or components.
Including the three bills in the NDAA would make them more likely to pass than if they were considered separately. Because the NDAA is an annual bill authorizing Defense Department spending and policies, its passage cannot be delayed.
The WSJ said that efforts to tighten regulations had stalled under President Donald Trump’s second administration as he built close ties with technology companies such as NVIDIA. But the bills gained new momentum as Democrats took control of both chambers in the midterm elections and the Jensen Huang scandal broke.
However, including the bills in the NDAA would not guarantee their passage through Congress. Individual provisions could be amended or dropped during negotiations between the parties.

The industry is pushing back. Critics say that instead of delivering the expected results, export controls have accelerated China’s own development and simply handed market share to Chinese competitors.
South Korean semiconductor companies are also expected to find it difficult to avoid the impact.
In particular, if the MATCH Act leads to tighter controls on semiconductor equipment exports to China, shipments of equipment to Samsung Electronics’ and SK hynix’s production facilities there, as well as upgrades to those facilities, could be disrupted.
On the other hand, if China’s inability to obtain advanced semiconductor equipment limits its technology development and expansion of production capacity, South Korean companies could benefit.
Samsung Electronics produces NAND flash memory in Xi’an, China, while SK hynix produces DRAM in Wuxi and NAND flash memory in Dalian.

[email protected] Song Kyung-jae Reporter