Japan announces restrictions on chip gear exports – without mentioning China

Since last November, the US has been lobbying its allies, including Japan, to join Washington in imposing export controls on chipmaking equipment to China. It didn’t take too long for Japan and the Netherlands to agree in principle to join the US, but both countries took time to chart a middle road between the two superpowers. 

Today, Japan’s Trade Minister Yasutoshi Nishimura announced that Tokyo will expand restrictions on exports of 23 types of leading-edge chipmaking technology, following similar curbs by the US designed to restrict China’s access to cutting-edge chips in an intensifying battle over the technology. Nishimura also clarified that the move was not in coordination with the US and was not a ban.

He claims these export controls apply to all regions and are not meant to target any one country. “We will be looking at whether there is any danger of military appropriation,” he told reporters earlier today, according to Bloomberg’s report. The measures will be subject to public comment before implementation slated for July.

The balance of peace.

Nishimura also said the restrictions were part of Japan’s responsibility as a technological nation to contribute to international peace and stability. “We do not have one particular country in mind with these measures,” said Nishimura.

Bloomberg’s report also noted that the ruling would now mean ten Japanese companies, including leading gearmaker Tokyo Electron Ltd., would need to get licenses to ship a broader-than-expected array of equipment used to transform silicon into chips, spanning cleaning, deposition, annealing, lithography, etching and testing.

Japanese officials also claim that the scope of the country’s restrictions went further than those imposed last year by the US. That means equipment exporters would need licenses for all regions, giving the Ministry oversight of the sale of equipment to third-party countries that could in theory produce high-end chips for military use.

“By expanding the regions that will be covered by the measures, we wanted to address a broader range of risks associated with advanced semiconductor technology,” one of the officials said. “China is not the only risk out there.”

For context, Japan and the Netherlands are where some of the world’s largest makers of semiconductor manufacturing equipment are headquartered. The US has been trying with all its might to gather allies because experts say that the US-driven export controls could only effectively choke China off entirely if other countries in the supply chain do the same.

The announcement today comes after a verbal deal was reached between the US, the Netherlands and Japan in January 2023. Prior to Japan’s move today, the Hague on March 9 revealed the first public details of its approach, which amounts to an intention to impose export restrictions on the “most advanced” semiconductor technology. 

In short, Japan is still taking a more cautious approach, by not identifying China as the target for its export restrictions. Apparently countries that are categorized as Japan’s most-favored trading partners will be able to continue importing without a license, the country’s Trade Ministry officials said. 

“Those nations include Taiwan and Singapore, key participants in the global semiconductor supply chain. Shipments of restricted equipment to China would require sign-offs by export control officials,” the report by Bloomberg reads. The export control by Japan will affect a wide range of equipment, including etching machines that are capable of making 14- and 16-nanometer and more advanced chips.

A more cautious approach.

Nishimura believes the impact on companies will be limited and that if their exports are not being reappropriated for military use, Japan will continue shipments. Japan’s planned export controls also include tools used to clean silicon wafers of impurities, extreme ultraviolet mask-testers, as well as immersion lithography machines. Screen Holdings, Lasertec and Nikon are suppliers of such equipment.

Even for the Netherlands, home to ASML Holding NV, its plans to curb exports of some so-called immersion DUV lithography products does not target any particular country. Rules from the Hague are expected to be published before the summer, adding to existing restrictions for the most cutting-edge lithography machines, critical to producing the world’s most advanced chips. 

The US on the other hand has specifically banned American gear suppliers Applied Materials Inc, Lam Research Corp. and KLA Corp. from shipping some of their most advanced technology to China. For the Biden Administration, Japan’s Tokyo Electron and the Netherlands’s ASML Holding NV are the two other critical suppliers that the US needs to contain China’s technological ascent.

Besides collaborating to restrict chip exports, Japan is also a part of a Chip Alliance proposal, which includes South Korea, Taiwan, and the US. The countries in the alliance each 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.