KLA Corp – a maker of chip tools based in the United States – will cease offering some supplies and services from Wednesday to customers in China, a source revealed on Tuesday.
The company, whose customers include South Korea’s SK Hynix, will take this action to comply with new export curbs announced by the Biden Administration on Friday, the source said.
The move underscores huge business headwinds facing chipmakers and chip equipment makers around the world, as the Biden administration published a sweeping set of export controls aimed at slowing China’s progress in advanced chip manufacturing and their use by China’s military.
China is KLA’s largest geographic market, bringing in $2.66 billion in sales, or nearly 30% of its total revenue in the last fiscal year that ended in June, according to the company’s financial filings.
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Licences Required
Under the new US regulations, companies looking to supply Chinese chipmakers with advanced manufacturing equipment must first obtain a licence from the US Department of Commerce.
The source, who declined to be identified due to the sensitivity of the matter, said staff in China received an email from KLA’s legal department stating that effective 11:59pm local time (1559 GMT) on Tuesday, the company shall stop sales and service to “advanced fabs” in China for technology of NAND chips with 128 layers or more, and DRAM chips 18nm and below, and advanced logic chips.
“Our top management team has told us to relax for a couple of months,” the source who was briefed on the matter said.
KLA did not immediately respond to a request for comment outside of working hours.
The source added that the company would also cease supplying China chip plants owned by Intel and SK Hynix, the world’s second-largest memory chipmaker.
Earlier reports said that foreign companies with fabs in China looking to receive advanced chip manufacturing equipment would have their licence applications reviewed on a case-by-case basis, while applications to supply Chinese fabs would be reviewed with through a “presumption of denial” standard.
SK Hynix reiterated its stance that it would seek a licence under new US export control rules for equipment to keep operating its factories in China. Intel did not immediately respond to a request for comment.
Companies Scrambling to Assess Impacts
China’s two leading memory chipmakers – Yangtze Memory Technologies Co (YMTC), Changxin Memory Technologies (CXMT) – and contract chipmaker Semiconductor Manufacturing International Corp (SMIC) are among the major customers affected by the US export control.
None of the three fabs immediately responded to requests for comment.
Another source at an overseas chip equipment company said that all major suppliers to fabs were working round-the-clock to assess the long-term impact of the regulations.
“We are all overreacting at first, while the legal teams work out the details for every piece of software and equipment that could be affected.”
Shares in KLA tumbled nearly 5% on Monday, hit by the latest US export control measures. Shares of many companies in the semiconductor sector plunged on Monday, allegedly cutting billions off the market cap of chipmakers and affiliated businesses around the globe.
Along with Lam Research Corp and Applied Materials Inc, KLA is among top US toolmakers now required to halt shipments to wholly Chinese-owned factories producing advanced chips.
- Reuters with additional editing by Jim Pollard
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