Japan cuts off China from advanced semiconductor equipment

The Ministry of Economy, Trade and Industry of Japan added 23 items to the export control list on July 23, which are used in the manufacture of semiconductors. Despite the lack of a direct indication of who this measure is aimed at, it is in line with the US course on technological containment of China, writes Asia Nikkei.

So, the Japanese list includes equipment for testing chips, thermal processing, lithography, deposition, as well as components necessary to work with one of the most advanced technologies – photolithography in deep ultraviolet (EUV). The latter allows you to make chips using 7 nm technology and less. Export of all designated technologies is no longer possible without special permission from the ministry. At the same time, Japan’s new export control rules simultaneously provide for a simplified procedure for issuing licenses for the supply of the said equipment for 42 conditionally “friendly” countries and territories.

According to Yoshiaki Takayama, a researcher at the Japan Institute of International Affairs, China will no longer be able to produce advanced chips in the short and medium term. At the same time, Japanese companies that work with the high-tech sector of the Chinese market may also suffer losses. According to the UN World Trade Center, in 2022 they accounted for a third of Chinese imports (we are talking about the products of Tokyo Electron and nine other companies). According to Kyodo, Japanese Economy Minister Yasutoshi Nishimura stressed that this is not a complete embargo on the supply of all equipment to China, but only a restriction on the export of advanced equipment for the production of semiconductors.

The Chinese Foreign Ministry expressed the opinion that the measures introduced by Tokyo would seriously damage the interests of the companies of the two countries, as well as Sino-Japanese cooperation.

Earlier, the Minister of Foreign Trade and Development Cooperation of the Netherlands – the second key country for the supply of semiconductor technologies to China – Elisabeth Schreinemacher also announced similar export control measures from September 1, 2023. Previous statements by the country’s leadership indicated that these restrictions are directed against China. The Netherlands is home to a unique company, ASML Holding NV, a monopoly in EUV lithography. At the same time, in this country, the export of EUV steppers to China has already been banned since 2019. At the end of 2022, it became known that the Chinese Huawei filed a patent for her own EUV lithograph, but it will take years to create it.

The latest decisions of Japan and the Netherlands were made not without pressure from their closest ally, the United States, which at the same time continues its policy of limiting the export of chips to China (limitations are expected for the field of artificial intelligence in July). So, back in January 2023, Japanese Prime Ministers Fumio Kishida and Dutch Prime Minister Mark Rutte coordinated their plans in Washington together with US President Joe Biden. Prior to this, on December 12, 2022, White House national security adviser Jake Sullivan told reporters directly that the United States had reached agreements with these two countries to limit chip technology. In March 2023, as Reuters reported, the US and Dutch authorities are negotiating the availability of DUV lithography (less advanced than EUV) for China.

In recent years, China has been heavily investing in the independent production of equipment for semiconductors, says Promobit CEO Maxim Koposov. Thus, it will have no problems with these products in the medium and long term, and in the near future, the PRC will use parallel imports and other similar schemes. Ultimately, China, Koposov is sure, will get out of an unpleasant situation, and Japanese manufacturers will only lose a significant market share of their largest consumer.

Within the framework of the G7, there are a number of agreements on the policy in the field of supplying chips, says Dmitry Streltsov, head of the Department of Oriental Studies at MGIMO. Thus, in his opinion, Japanese decisions fit into the overall long-term strategy of Western countries to contain China’s technological containment, especially if the possibility of military use of technology is seen. In addition, the Ukrainian conflict could also affect the tightening of control, adds Streltsov. Tokyo’s decision is unlikely to lead, according to the expert, to a serious aggravation of relations between the two sides.