*

White House views plan as a contingency if trade truce

fails

*

Move would make it harder for foreign chipmakers to

operate in

China

*

Move would be a "gift" to domestic Chinese competitors

(Changes sourcing, adds comments on motive, chances throughout)

By Karen Freifeld and Alexandra Alper

June 20 (Reuters) -

The Department of Commerce is considering revoking

authorizations granted in recent years to global chipmakers

Samsung, SK Hynix ( HXSCF ) and TSMC,

making it more difficult for them to receive U.S. goods and

technology at their plants in

China

, according to people familiar with the matter.

The chances of the

United States

withdrawing the authorizations are unclear. But with such a

move, it would be harder for foreign chipmakers to operate in

China, where they produce semiconductors used in a wide range of

industries.

A White House official said the United States was "just

laying the groundwork" in case the truce reached between the two

countries fell apart. But the official expressed confidence that

the trade agreement would go forward and that rare earths would

flow from China, as agreed.

"There is currently no intention of deploying this tactic,"

the official said. "It's another tool we want in our toolbox in

case either this agreement falls through or any other catalyst

throws a wrench in bilateral relations."

Shares of U.S. chip equipment makers that supply plants

in China fell when the Wall Street Journal first reported the

news earlier on Friday. KLA Corp ( KLAC ) dropped 2.4%, Lam

Research ( LRCX ) fell 2.3% and Applied Materials ( AMAT ) sank

1.7%. Shares of Micron, a major competitor to Samsung and SK

Hynix ( HXSCF ) in the memory chip sector, rose 1.3%.

In October 2022, after the United States placed sweeping

restrictions on U.S. chipmaking equipment to China, it gave

foreign manufacturers like Samsung and Hynix ( HXSCF ) letters authorizing

them to receive goods.

In 2023 and 2024, the companies received what is known

as Validated End User status in order to continue the trade.

A company with VEU status is able to receive designated

goods from a U.S. company without the supplier obtaining

multiple export licenses to ship to them. VEU status enables

entities to receive U.S.-controlled products and technologies

"more easily, quickly and reliably," as the Commerce Department

website puts it.

The VEU authorizations come with conditions, a person

familiar with the matter said, including prohibitions on certain

equipment and reporting requirements.

"Chipmakers will still be able to operate in China," a

Commerce Department spokesperson said in a statement when asked

about the possible revocations. "The new enforcement mechanisms

on chips mirror licensing requirements that apply to other

semiconductor companies that export to China and ensure the

United States has an equal and reciprocal process."

Industry sources said that if it became more difficult for

U.S. semiconductor equipment companies to ship to foreign

multinationals, it would only help domestic Chinese competitors.

"It's a gift," one said.