US feds remove export restrictions on China chip firms

October 19, 2007 – Chinese foundries Semiconductor Manufacturing International Corp. (SMIC) and Shanghai Hua Hong NEC Corp. (HHNEC), plus local subsidiaries of two US chip industry firms, have been granted “validated end-user” (VEU) status from the US government, essentially removing licensing requirements to obtain equipment and materials from US suppliers.

Essentially the VEU ruling means the companies can now receive and use approved US equipment and materials without delays and costs associated with traditional export licensing. Products covered under these firms’ VEU status including pressure transducers, semiconductor raw materials, and manufacturing equipment (e.g. ion implantation, etching, wafer handling, and lithography) — technologies designated “dual-use” by the US government, in that they could also be applied to military applications. Other items flagged as dual-use on the “Commerce Control List” include aircraft/avionics/inertial navigation systems, lasers, depleted uranium, underwater cameras and propulsion systems, certain composite materials, and some telecommunications equipment.

Other chip industry firms receiving VEU status are Applied Materials’ Chinese subsidiary (sites in Beijing, Shanghai, and Wuxi), and National Semiconductor Corp. (offices in Beijing, Shanghai, and Shenzhen; products approve are analog-to-digital converters). The four chip-industry companies, along with another VEU winner Boeing Hexcel AVIC I (a JV making composite parts for aircraft), accounted for 150 licenses from 2002-2006, noted the US Commerce Department’s Bureau of Industry and Security, in a statement.

In its own separate statement, SMIC said that the VEU ruling applies to all sites in its VEU application, including the 200mm fab it manages for Cension, and the foundry expects to include its now-being-built 300mm fab in Wuhan “when it is mature enough to qualify,” according to Matthew Szymanski, VP for corporate relations and manager of SMIC’s export compliance, in a statement.

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