U.S. likely to cap level of S.Korean chips made in China- U.S. official

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In October, South Korea’s Samsung Electronics (OTC:SSNLF) and SK Hynix, the world’s top memory chip makers, received an one-year reprieve from U.S. export restrictions aimed at thwarting Beijing’s technological ambitions and blocking its military advances.

“What will likely be is a cap on the levels that they can grow to in China,” said Alan Estevez, the U.S. Commerce Department’s under secretary for industry and security, when asked what would happen after the waiver ended.

Estevez who oversees restrictions on tech exports to China made the comments on Thursday during a forum hosted by the Center for Strategic and International Studies, a Washington-based think tank.

“If you’re at whatever layer of NAND, we will stop it somewhere in that range,” Estevez said, referring to a flash memory product manufactured by Samsung (KS:005930) and SK. He added that the U.S. government was in deep dialogue with the South Korean chipmakers.

“We work with them to ensure that we aren’t going to harm our allies’ companies. At the same time, we’re going to impede the Chinese capability of building capabilities that are going to threaten us collectively,” he said.

Samsung Electronics and SK Hynix were not immediately available for comment.

Samsung and SK Hynix, which control about half of the global NAND flash memory chip market, have invested heavily in China in recent decades to produce chips that are vital to customers including tech giants Apple (NASDAQ:AAPL), and Amazon (NASDAQ:AMZN).

Earlier, an American official acknowledged the existence of a deal with Japan and the Netherlands for those countries to impose new restrictions on exports of chipmaking tools to China.