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Japan Joins the US in Restricting Sales of Chipmaking Equipment to China

Microchip production factory. (Photo;© Dashark | Dreamstime.com)

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By Paul Hunter

April 18, 2023
3:46 pm
Los Angeles, CA

The Japanese government announced on March 31 that it will be restricting exports of chip manufacturing equipment to China. This news comes in the wake of a series of regulations passed in the United States and the Netherlands, aimed at stunting China’s development of semiconductors, which power everything from laptops and smartphones to military technology. Japan’s new regulations take effect in June this year. They target 23 pieces of equipment, including lithography machines, tools used for chemical wafer polishing, etching equipment, and extreme ultraviolet (EUV) light testing—all vital in the creation of semiconductors. The companies that export these items—including Nikon, Lasertec, Screen Holdings, and Tokyo Electron—will have to obtain special permission in order to sell to China. There is currently no explanation as to what that process will look

Japan’s new regulations take effect in June this year. They target 23 pieces of equipment, including lithography machines, tools used for chemical wafer polishing, etching equipment, and extreme ultraviolet (EUV) light testing—all vital in the creation of semiconductors. The companies that export these items—including Nikon, Lasertec, Screen Holdings, and Tokyo Electron—will have to obtain special permission in order to sell to China. There is currently no explanation as to what that process will look like, or if they will be granted permission at all.

On Wednesday, March 8, the Netherlands announced via a letter written by its trade minister to parliament that the Dutch government will also be restricting exports to China, citing national security concerns. This a huge blow to the Chinese manufacturing sector. The Netherlands is home to ASML, which has a monopoly on the manufacture of advanced EUV technology, used to cut silicon wafers into viable processors or chips. China will still be allowed to purchase older models, but will find creating state-of-the-art devices particularly difficult, and they won’t be allowed to keep up with new advancements in the field. A Chinese foreign ministry spokesperson, Mao Ning, spoke out against the decision, stating, “We hope the Netherlands won’t follow some countries in abusing export control measures.” Mao added, “China will take all necessary countermeasures to protect our legitimate rights and interests.” Another Chinese official, Tan Jian, an ambassador to the Netherlands, told the Dutch newspaper Financieele Dagblad, “China won’t swallow everything. If damage occurs, we must take action to protect ourselves.” He went on to say, “I’m not going to speculate on what that might be. It won’t be just harsh words.”

A spokesperson for the Chinese Commerce Ministry made a sImilar remark in response to Japan’s restriction. They called it the “wrong action” and said, “China will take decisive measures to safeguard its rights and interests if Japan insists on obstructing the chip industry cooperation between the two countries.” The similar wording in these statements is likely a sign that the officials were applying talking points given to them by high-ranking government officials in the Communist Party. Chinese President Xi Jin Ping lashed out in an unprecedented move imploring private companies to “fight” with the Communist Party, accusing the US of trying to “contain” and “suppress” China.

That is exactly what the US is trying to do, and they appear to have succeeded. Regulations have been put in place that ban American green-card holders, citizens, or entities from aiding the Chinese in developing its semiconductor industry without prior approval. This ties the hands of many senior executives who are already working in the industry, a serious issue considering that most of the technology is American, and there are no foreign equivalents.

Companies in the US dominate the market for logic chips required to process data. AMD, Intel, and Apple sell the best central processing units—which are key components for modern computers of all types—while AMD and Nvidia supply the vast majority of the world’s graphics processing units. These products cannot be replaced by Chinese manufacturers. The country is too far behind. The new Dutch and Japanese restrictions are the final nail in the coffin, ensuring that China will be fully incapable of producing cutting-edge tech. This includes the equipment they would need to equip the People’s Liberation Army, putting armed forces across the world at a great advantage.

Needless to say, Beijing is furious. They have been issuing threats, but they are powerless to follow through as they are afraid of losing the few imports they are still being supplied with, even if they are obsolete. They also have to proceed with caution to avoid disrupting the industry.

Many say that the Chinese government have brought it upon themselves, and they are not wrong. These restrictions have been put in place because of legitimate privacy and security concerns. Chinese law mandates that hardware must contain a backdoor giving the Communist government control of devices made by Chinese companies. The same goes for smartphones, tablets, PCs, cameras, and microphones—anything with internet access and a chip, and this has resulted in some frightening scenarios. Hikvision, a Chinese surveillance firm, is said to have cameras on every high street in London, and they’ve only recently been banned in government buildings in the UK. The UAE’s nationwide surveillance network—one of the most extensive on the planet—was largely powered by those cameras as well. Smartphone manufacturers ZTE and Huawei had the Chinese government spying on anyone in range of their products, which were shipped across the world. Not everyone is comfortable being surveilled by a government that cracks down on dissidence. Now that government will not have access to the chipmaking technology necessary to build those devices.