Will Japan impose a milder restriction on chip gear exports or go all out?

Once a semiconductor giant half a century ago, before getting brutally beaten down by the US, Japan is reportedly still considering its approach to implementing restrictions on chip gear exports to China. The country was persuaded by the US two months ago to join it and the Netherlands in expanding semiconductor export controls on China.

The goal for the US is clear–to cripple China’s home-grown chip industry. Since Japan and the Netherlands are where some of the world’s largest manufacturers of semiconductor manufacturing equipment are headquartered, it only made sense for the US to gather the two countries as allies. That will allow a more concerted effort in imposing export control on chip gear and further impede China’s rise in military power.

After the Dutch government revealed the first public details on its approach yesterday, Japan, a day later, indicated that it has yet to decide on restrictions on chip gear exports. In short, while the Hague abided by the US’ request to limit sales to China, Japan is taking a more cautious approach. 

As experts put it, the move is expected as some American allies seek a middle ground between Washington and Beijing. But the Netherlands was more immediately decisive –  its trade minister, Liesje Schreinemacher, wrote to parliament last week, outlining the new measures without specifying which chip-making machines were affected.

The Netherlands, home to ASML Holding NV, plans to curb exports of some so-called immersion DUV lithography products to China. That rule, expected to be published before the summer, adds to existing restrictions for the most cutting-edge lithography machines, critical to producing the world’s most advanced chips. 

Will Japan replicate restrictions by the US?

On the other hand, Japanese Trade Minister Yasutoshi Nishimura said the country would consider appropriate measures in light of developments in the Netherlands. “Our understanding is that the Dutch announcement does not target a specific country.” In Japan, Tokyo Electron Ltd. is a crucial supplier of chip machines used to make semiconductors, along with US rival Applied Materials Inc.

Unfortunately, many US allies struggle to balance Washington’s concerns about China’s access to leading-edge technology with their reliance on the world’s biggest manufacturer. In February, an influential Japanese ruling party lawmaker told Reuters that Japan might opt for milder export restrictions on chip production machinery to China than those implemented by the US, even though they agree on export curbs.

“The US is strict, but there is a question of whether we must match that exactly. What we do share is a recognition of the concern over the equipment,” said Akira Amari, a former Liberal Democratic Party minister of economy, trade, and industry. Should Japan go for separate restrictions, it could be a political headache for the Biden Administration because it can make the US equipment less competitive than its rivals.

Last month, SEMI, an industry group representing 2,500 semiconductor and electronics manufacturing supply chain members, warned that export controls on China would only be adequate if US allies adopted curbs aligned with the United States. According to the local Japanese media outlet Kyodo, Japan is trying to reduce the risk of retaliation from Beijing by not specifying China directly in the restrictions.

However, it is also fair to note that Japan’s minister of economy, trade, and industry, Yasutoshi Nishimura, has said it is absolutely imperative for them to reinforce their cooperation with the US in the area of export control. Nishimura claims the move is essential, especially “to address the misuse of critical and emerging technologies by malicious actors and inappropriate transfers of technologies.” 

Besides collaborating to restrict chip exports, Japan is also a part of The Chip Alliance proposal, which includes South Korea, Taiwan, and the US. The countries in the alliance excel in specific segments of the semiconductor industry. For the US, combining the strength of each participant will create a complete semiconductor supply chain that runs from design to manufacturing. 

The US and Japan launched a high-level economic dialogue in June last year, pushing back against China and countering the disruption caused by Russia’s invasion of Ukraine. The two long-time allies agreed to establish a new joint research center for next-generation semiconductors during the so-called economic “two-plus-two” ministerial meeting in Washington.