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Samsung and SK Hynix, the world’s leading memory chipmakers, have stopped selling used chipmaking equipment for fear of falling foul of US export controls on China and western sanctions on Russia.
The South Korean companies have been storing used machines in warehouses instead of putting them on the secondary market, three traders of second-hand chipmaking tools told the Financial Times.
“We are worried it [the equipment] could fall into the wrong hands, and that this could cause problems in our relations with the US government,” said a person close to one chipmaker.
Chipmakers started storing the old machines in 2022, after Washington imposed export controls to try to slow Chinese efforts to obtain high-performance semiconductors and advanced chipmaking equipment.
“Some Chinese buyers have been selling tools on to Russia, so [the chipmakers] are scared of a backlash from the US side about that too,” said a second-hand tool trader based in South Korea.
The US is pushing allies in Europe and Asia to tighten the restrictions, following the debut of an advanced chip by Chinese mobile phone maker Huawei and chipmaker Semiconductor Manufacturing International Corporation, despite both companies being on a US trade blacklist.
Samsung and SK Hynix are large sources of second-hand equipment supply due to the rapid turnover of tools as memory chipmakers move swiftly from one generation of chip to the next.
The South Korean semiconductor companies typically bundle used equipment into packages before selling them to dealers who put them up for sale at auctions. The biggest demand comes from China, where most chipmakers are focused on producing older generations of chips used in appliances and cars.
Equipment that is no longer needed by the South Korean producers of cutting-edge chips for smartphones and artificial intelligence systems can be refurbished and reinstalled in Chinese facilities, usually for the production of less-advanced chips not covered by US controls, according to a Japan-based used equipment seller.
However, the seller added that even 10-year-old second-hand machines, such as lithography equipment used to “print” transistors on logic and memory chips, could be deployed to make advanced chips once they had been repaired.
The administration of President Joe Biden has been active in policing violations of US export controls on China and sanctions on Russia. In February, the Chinese commerce ministry issued a statement criticising sanctions imposed on 17 companies in Hong Kong and mainland China for alleged violations of Russia-related sanctions.
According to a person familiar with the matter, SK Hynix recently started to sell some machines again after it started to run out of storage space. The person added that the company was still refraining from selling US-made equipment, which ranges from wafer grinders to etching machines.
“South Korea knows that the equipment from Samsung or SK Hynix ends up in sanctioned Chinese fabs like [those of] SMIC or YMTC, it would not be good for the relationship between the US and South Korea,” said Gregory Allen, director of the Wadhwani Center for AI and Advanced Technologies.
Samsung Electronics and SK Hynix both declined to comment. But a person familiar with the companies confirmed the stockpiling was related to US export controls on China and sanctions on Russia.
Samsung and SK operate their own memory chip plants in China, which account for about half of their production capacity. They have both been granted indefinite waivers by the Biden administration that allow them to send US chipmaking tools to China to maintain and upgrade their Chinese facilities.
The chipmakers are also holding on to their used equipment in China over concerns that they may need them if Washington tightens export controls further, forcing them to use less sophisticated tools.
A senior manager at an SK Hynix factory in China said it was “well aware that permission to ship equipment to China can be withdrawn by the US”, making it reluctant to sell off second-hand stock.
“They have a choice: to sell, to store, or to scrap,” said the Korea-based manager. “But we are talking about hundreds, if not thousands of machines together worth millions of dollars, so at the moment they are choosing to store.”
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