In a bold escalation of its semiconductor policy, the United States is preparing to revoke long-standing waivers that have allowed foreign chipmakers such as Samsung Electronics, SK Hynix, and TSMC to utilize U.S. technology in their manufacturing operations within China. According to the Wall Street Journal, Jeffrey Kessler, Under Secretary of Commerce for Industry and Security, informed the companies of the plan this week.
These waivers, granted after the U.S. first imposed sweeping export restrictions on China’s semiconductor sector in 2022, had allowed some flexibility for key allies. Now, that flexibility is poised to vanish, signaling a hardening of Washington’s stance on curbing China’s access to advanced chip technology even when it affects friendly nations.
This move is not merely about industrial competition. It reflects a broader strategic effort by the U.S. to restrict China’s access to advanced computing capabilities, particularly those relevant to artificial intelligence (AI), quantum computing, and military applications.
Washington has long expressed concern that Chinese firms, especially those with links to the state, could leverage cutting-edge chips for surveillance, cyberwarfare, or autonomous weapons systems. The U.S. believes that controlling the tools and know-how required to build these chips is a linchpin in this strategic contest.
By tightening export controls even further removing exceptions for allies’ factories in China the Biden administration is signaling that national security now trumps even the risks of straining economic ties with key partner nations.
Impact on Chipmakers: Immediate and Severe
The policy shift will likely force companies such as Samsung, SK Hynix, and TSMC to restructure or slow down their operations in China. While the U.S. Commerce Department insists that chipmakers can still function under new licensing mechanisms, the removal of blanket waivers introduces regulatory uncertainty and logistical hurdles.
Industry analysts warn that even if operations continue, the approval process under stricter export controls will be costly, time-consuming, and prone to political delays.
Already, the market has reacted sharply. U.S. chip equipment suppliers companies like KLA Corp, Lam Research, and Applied Materials, whose machines are crucial for semiconductor fabrication saw their shares plunge between 3.8% and 4.7% following the news.
These firms have significant business exposure to Chinese fabs, and tighter controls may limit their ability to service or upgrade those operations.
Commerce Department’s Justification: “Reciprocity”
A spokesperson for the U.S. Commerce Department emphasized that the new approach is not intended to shut down foreign chipmakers’ China-based plants. Rather, it seeks to ensure “equal and reciprocal licensing” across all semiconductor exporters.
“Chipmakers will still be able to operate in China,” the spokesperson said, “but they must do so under the same regulatory framework that applies to others. This is about creating a level playing field while protecting national security.”
Critics argue, however, that equalizing rules on paper does little to mitigate the asymmetry of risk. China remains the world’s largest semiconductor market, and for South Korean and Taiwanese chip firms, China-based production is economically essential.
This new policy forces key U.S. allies into a delicate balancing act. South Korea and Taiwan rely on China both as a market and as a manufacturing base. Samsung and SK Hynix, for instance, have invested billions of dollars into Chinese memory chip factories. TSMC operates fabrication plants in China that serve both Chinese and multinational clients.
The timing is particularly sensitive for South Korea, whose government has tried to navigate the tension between its economic ties with China and security alignment with the United States. Meanwhile, Taiwan faces the dual pressures of economic interdependence and geopolitical vulnerability, as its semiconductor sector is viewed as both a strength and a strategic liability.
The cancellation of waivers could leave these countries with little choice but to scale back their operations in China, or risk running afoul of U.S. trade law.
Beijing has yet to issue a formal response to the waiver withdrawal, but retaliation is likely. China has previously imposed export controls on critical minerals like gallium and germanium in response to chip-related sanctions.
However, China’s dependence on foreign chipmaking tools and intellectual property limits its immediate options for escalation. The Chinese government may instead double down on its “Made in China 2025” initiative, pumping more subsidies into local chip firms in an effort to accelerate self-reliance in semiconductor manufacturing.
With this latest move, the U.S. is accelerating the fragmentation of the global semiconductor industry. What was once a highly interconnected, efficiency-driven supply chain is becoming a geopolitically bifurcated system, where the cost of doing business increasingly depends on the side of the geopolitical divide one stands on.
While the U.S. aims to protect its technological edge, its aggressive restrictions may inadvertently push allies closer to developing their own alternatives, or even diversifying away from U.S.-sourced technology in the long term.
The decision to cancel chip technology waivers for allies’ operations in China represents a defining moment in U.S. tech policy. It reflects a dramatic shift away from economic integration and toward strategic decoupling.
Though the full impact remains to be seen, one thing is clear: the semiconductor cold war is deepening and its consequences will reverberate through global supply chains, boardrooms, and diplomatic channels alike.
