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Japan tightens chip gear exports as U.S. seeks to contain China

March 31, 2023 Updated Fri., March 31, 2023 at 7:34 p.m.

A silicon wafer is displayed at Semicon Japan exhibition in Tokyo in December.  (Kiyoshi Ota/Bloomberg)
A silicon wafer is displayed at Semicon Japan exhibition in Tokyo in December. (Kiyoshi Ota/Bloomberg)
By Takahiko Hyuga </p><p>and Yuki Furukawa Bloomberg

Japan said it will expand restrictions on exports of 23 types of leading-edge chipmaking technology, as the U.S. ratchets up efforts to limit China’s access to key semiconductor know-how.

About 10 Japanese companies including leading gearmaker Tokyo Electron 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.

Tokyo’s move follows months of lobbying by the U.S. to get Japan to join it in tightening shipments of semiconductor tools to China. Japan and the Netherlands had agreed in principle to join the U.S., but have sought to chart a middle road between the two superpowers.

Japan Trade Minister Yasutoshi Nishimura said the move was not in coordination with the U.S. and was not a ban.

“These export controls apply to all regions and are not meant to target any one country,” he told reporters on Friday. “We will be looking at whether there is any danger of military appropriation.”

However, Japan’s most-favored trading partners – including South Korea, Singapore and Taiwan – will be able to continue importing without a license, trade ministry officials said. Shipments of restricted equipment to China would require sign-offs by export control officials.

Japan’s announcement comes a day before Foreign Minister Yoshimasa Hayashi’s visit to China the first by a foreign minister in more than 3 years. It also coincides with Taiwan President Tsai Ing-wen’s trip to the U.S., which China has protested.

With the help of the Netherlands and Japan, the U.S. is seeking to create a global blockade to prevent China from getting key equipment now essential to make the most advanced chips used in quantum computing, advanced wireless networks and artificial intelligence.

Much hinges on how Japan implements the controls. If Japan refuses to approve any, that could be a blow for the country’s semiconductor equipment manufacturers as well as for China, Morningstar analyst Kazunori Ito said.

Chip-related stocks fell on the news, with Tokyo Electron, Screen, Nikon and Lasertec all paring gains.

Tokyo’s measures – which will be subject to public comment before implementation slated for July – affect a wide range of equipment, similar to the U.S. curbs in scope. Etching machines that are capable of making 14- and 16-nanometer and more advanced chips would be affected, for instance.

“If our exports are not being re-appropriated for military use, we will continue shipments,” Nishimura told reporters. “We believe the impact on companies will be limited.”

China blasted Japan’s decision. Mao Ning, a spokeswoman for China’s Foreign Ministry, said that politicizing and weaponizing trade and technological issues, and sabotaging the global supply chain will only bring harm to all, according to state media CCTV.

The U.S., Netherlands and Japan together control critical equipment now necessary for China to make leading-edge chips. The U.S. has banned American gear suppliers Applied Materials, Lam Research and KLA from shipping some of their most advanced technology to China without a license. Japan’s Tokyo Electron and the Netherlands’s ASML are the two other critical suppliers that the U.S. needs to contain China’s technological ascent.

Japan’s planned export controls include tools used to clean silicon wafers of impurities, extreme ultraviolet mask-testers, as well as all immersion lithography machines. Screen Holdings, Lasertec and Nikon are suppliers of such equipment.

Over the long term, China will be forced to develop its own chipmaking machines, said Toyo Securities analyst Hideki Yasuda. “A complete decoupling of standards in chips would make it difficult for China to produce semiconductors at low cost.”

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