Exclusive-KLA to halt sales and service to China to comply with US export restrictions

By Josh Horwitz

SHANGHAI (Reuters) – U.S. chip tool maker KLA Corp will stop offering certain supplies and services from Wednesday to China-based customers, including South Korea’s SK Hynix, in line with recent U.S. regulations, said Tuesday a source close to the situation.

The move underscores the huge headwinds facing chipmakers and chip equipment makers around the world, as the Biden administration on Friday issued a sweeping set of export controls aimed at slowing the progress of China in advanced chip manufacturing.

China is the KLA’s largest geographic market, generating $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 financial documents.

Under new U.S. regulations released on Friday, companies seeking to supply Chinese chipmakers with advanced manufacturing equipment must first obtain a license from the U.S. 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 the KLA legal department stating that as of 11:59 p.m. local time ( 3:59 p.m. GMT) on Tuesday, the company would cease sales and service. to “advanced factories” in China for NAND chip technology with 128 or more layers, and DRAM chips of 18nm and below, and advanced logic chips.

“Our management team told us to relax for a few months,” the source who was briefed on the matter told Reuters.

The KLA did not immediately respond to a request for comment outside working hours.

The source added that the company would also stop supplying Chinese chip factories owned by Intel and SK Hynix, the world’s second-largest memory chip maker.

Reuters had previously reported that foreign companies with factories in China seeking to receive advanced chipmaking equipment would have their license applications considered on a case-by-case basis, while requests for supplies from Chinese factories would be considered on a one-to-one basis. “presumption of denial” standard. .

SK Hynix reiterated its position that it would seek a license under new US export control rules for equipment in order to continue operating its factories in China. Intel did not immediately respond to a request for comment.

China’s two major memory chipmakers – Yangtze Memory Technologies Co Ltd (YMTC), Changxin Memory Technologies Inc (CXMT) – and contract chipmaker Semiconductor Manufacturing International Corp (SMIC) are among the top customers affected by the US scrutiny. exports.

None of the three factories immediately responded to Reuters requests for comment.

Another source at a foreign chip equipment company told Reuters that all major factory suppliers were working around the clock to assess the long-term impact of the regulations.

“We all overreact at first, while the legal teams work out the details of every piece of software and equipment that might be affected.”

KLA shares fell nearly 5% on Monday, hit by the latest US export controls.

Along with Lam Research Corp and Applied Materials Inc, KLA is among major U.S. toolmakers now required to halt shipments to all-Chinese factories producing advanced chips.

(Additional reporting by Joyce Lee in Seoul; editing by Miyoung Kim and Jacqueline Wong)

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