*

SK Hynix ( HXSCF ), Samsung will need licenses to buy US equipment

for

China

*

US equipment makers KLA Corp ( KLAC ), Lam Research ( LRCX ), Applied

Materials ( AMAT )

likely impacted

*

Rule takes effect in 120 days

(This August 29 story was updated on August 31 to add China

commerce ministry comments in paragraph 10)

By Karen Freifeld

Aug 29 (Reuters) - The United States is making it more

difficult for chipmakers Samsung and SK Hynix ( HXSCF )

to produce chips in China by revoking authorizations

that allowed the companies to receive American semiconductor

manufacturing equipment there, according to the Federal

Register.

The U.S. Commerce Department had given the companies

exemptions to sweeping restrictions created in 2022 on the sale

of U.S. semiconductor equipment to China.

The companies will now need to obtain licenses to buy the

equipment for China. The federal filing also included Intel ( INTC )

among the companies that lost their authorization for

China, although Intel ( INTC ) sold its Dalian, China, unit in a deal

that was finalized this year.

The revocations will take effect in 120 days, according to

the posting.

The Commerce Department said in a statement that the United

States plans to grant license applications to allow the

companies to operate their existing facilities in China, but

does not intend to grant licenses to expand capacity or upgrade

technology.

SK Hynix ( HXSCF ) said in a statement that it "will maintain close

communication with both Korean and the U.S. governments and take

necessary measures to minimize the impact on our business."

Samsung did not respond to a request for comment.

South Korea's government has explained to the Commerce

Department "the importance of a stable operation of our

semiconductor companies in China for the stability of the global

semiconductor supply chain," the industry ministry said.

Seoul will continue discussions with Washington to minimize

the impact on South Korean companies, the ministry said.

A spokesperson for China's commerce ministry said Beijing

"opposes the U.S. move" and "will take necessary measures to

resolutely safeguard the legitimate rights and interests of

enterprises."

The licensing change will likely reduce sales to China by

U.S. equipment makers KLA Corp ( KLAC ), Lam Research ( LRCX )

and Applied Materials ( AMAT ). The companies did not

immediately respond to requests for comment.

Shares of Lam fell 4.4%, Applied Materials ( AMAT ) dropped 2.9% and

KLA shares were down 2.8%.

CHINESE MAKERS, MICRON MAY BENEFIT

In June, when the U.S. Commerce Department raised the

possibility of revoking the authorizations, a White House

official said the United States was "just laying the groundwork"

in case the truce in trade talks between the two countries fell

apart.

In July, the two allies and major trading partners announced

a deal on tariffs, but South Korean President Lee Jae Myung came

away from a summit with U.S. President Donald Trump this week

without finalizing the agreement in writing.

The United States and China are operating under a tariff

truce, with levies of 30% on Chinese imports to the U.S. and 10%

Chinese duties on U.S. goods locked in until November. The trade

war between the world's two largest economies has affected

everything from rare earths needed by U.S. industry to China's

purchase of U.S. soybeans.

The White House did not have an immediate comment.

"This move will make it harder for Korean chipmakers with

facilities in China to continue producing more advanced chips,"

said Chris Miller, author of "Chip War."

The move may help domestic Chinese equipment makers, whose

tools can fill gaps. It also may help Micron, a major

U.S. competitor to South Korea's Samsung and SK Hynix ( HXSCF ) in the

memory chip sector.

"If this isn't accompanied by further steps against (Chinese

chipmakers like) YMTC and CXMT, it risks opening market space

for Chinese firms at the expense of the Korean firms," Miller

said.

Thousands of license applications by U.S. companies to

export goods and technology to China also have been in limbo in

recent months, creating a massive backlog, as Reuters reported

this month, including for billions of dollars' worth of

semiconductor manufacturing equipment.

Foreign chipmakers like Samsung and Hynix ( HXSCF ) now have what is

known as Validated End User status, which allows U.S. suppliers

to ship goods to them "more easily, quickly and reliably," as

the Commerce Department says on its website, than they would if

export licenses were required. That VEU status will be removed.