US China Chip War: KLA Relaxes Chip Supply To China

U.S. chipmaker KLA Corp KLAC agreed to discontinue offering some supplies and services from Wednesday to China-based customers.

The embargo extended to South Korea's SK Hynix Inc HXSCL in compliance with recent U.S. regulations, Reuters reported.

The Biden administration launched a sweeping set of export controls to restrict China's progress in advanced chip manufacturing.

Shares in top Chinese chipmakers shed $7.7 billion in market value on October 10, as new U.S export controls restricted the sale of semiconductors made with U.S. technology unless vendors obtain an export license.

The controls also barred U.S. citizens or entities from working with Chinese chipmakers without explicit approval and limited the export of manufacturing tools that would allow China to develop its equipment.

China is KLA's most prominent geographic market, generating $2.66 billion in sales, or nearly 30% of its total revenue in the last fiscal year that ended in June.

KLA's legal department emailed China informing that it shall stop sales and service to "advanced fabs" in China for the technology of NAND chips with 128 layers or more, DRAM chips 18nm and below, and advanced logic chips.

KLA's top management instructed it to relax for a couple of months. KLA would also stop supplying China chip plants owned by Intel Corp INTC and SK Hynix, the world's second-largest memory chipmaker.

Along with Lam Research Corp LRCX and Applied Materials Inc AMAT, KLA is among the top U.S. toolmakers now required to halt shipments to wholly Chinese-owned factories producing advanced chips.

In September, the U.S. restricted sales of Nvidia Corp's NVDA high-performance AI chips for servers, the A100 and H100, to China and Russia, citing national security concerns. 

The U.S. also urged Advanced Micro Devices, Inc AMD to stop exporting its MI250 chips to China.

Price Action: KLAC shares traded lower by 2.92% at $290.60 premarket on the last check Tuesday.

Photo by Henrix_photos via Pixabay