KLA Stops Supplies to China in Response to U.S. Government Regulations

According to a report on October 13th, 2022, US semiconductor equipment maker KLA Corp will stop supplying its customers in China with state-of-the-art products and services starting October 12th. This is in response to the latest export control rules announced by the U.S. Government.

Chinese Communist Party (CCP) is KLA’s largest geographic market. According to the company’s financial reports, sales for the last fiscal year ending in June were $2.66 billion, accounting for nearly 30 percent of its total revenue.

However, on October 7th, the U.S. Government announced a policy to effectively restrict exports through strict screening, requiring companies looking to supply CCP’s chipmakers with advanced manufacturing equipment must first obtain a license from the U.S. Department of Commerce.

According to sources, KLA employees based in China have received instructions via email from the legal department, and have decided to stop providing product sales and services to communist nation’s semiconductor factories that produce NAND chips with128 layers or more, and DRAM chips below 18nm. The discontinued trading partners include Intel and the world’s second-largest memory chipmaker, SK Hynix, which owns chip plants in China.

CCP’s companies such as Yangtze Storage Technology (YMTC), Changxin Memory Technologies Inc. (CXMT) and contract chipmaker Semiconductor Manufacturing International Corporation (SMIC) are expected to be affected.

Additionally, the U.S. Federal Communications Commission (FCC) plans to ban Chinese telecom equipment giants Huawei and ZTE from selling all communications equipment in the United States, citing national security concerns. Last year, President Joe Biden signed a bill preventing companies deemed a security threat from obtaining new equipment licenses from U.S. regulators.