U.S. consults with Japan, Netherlands on chip restrictions as China pushes back

U.S. consults with Japan, Netherlands on chip restrictions as China pushes back

The U.S.-China row over technology has ratcheted up this week, with Washington confirming talks with Japan and the Netherlands about tightening exports of semiconductor manufacturing equipment to China, and Beijing hitting back.

China on Monday launched a trade dispute at the World Trade Organization opposing U.S. chip export control measures, while Reuters reported on Tuesday that it is preparing a more than 1 trillion yuan ($143 billion) package to support its domestic chip-making industry.

The Biden administration aims to cut China off from advanced semiconductor chips made anywhere in the world with U.S. equipment in a bid to slow Beijing’s technological and military advances, and it issued a series of curbs in October.

Jake Sullivan, the White House national security adviser, on Monday said discussions have taken place with Japan and the Netherlands – both major suppliers of chip making equipment – on adopting similar measures.

“I’m not going to get ahead of any announcements,” he told reporters. “I will just say that we are very pleased with the candor, the substance and the intensity of the discussions.”

Sullivan’s comments followed a report by Bloomberg News that Japan and the Netherlands have agreed in principle to join the U.S.-led technology export control, citing people familiar with the matter.

Asked about the report, Japanese Trade Minister Yasutoshi Nishimura said co-operation in export control figured in a telephone conversation he had with U.S. Commerce Secretary Gina Raimondo, but declined to elaborate.

“I cannot go into details as they are diplomatic exchanges, but Japan has been implementing its export control strictly, based on the foreign exchange and foreign trade law in the spirit of international co-operation,” he told reporters.

A spokesperson for the Dutch foreign ministry declined to comment. Trade Minister Liesje Schreinemacher has said the Netherlands is in talks with the United States on restrictions beyond those currently in place.

In October, U.S. officials said they expected to reach a deal with allies on curbing exports ‘in the near term”.

Apart from top U.S. gear suppliers, Japan’s Tokyo Electron Ltd (8035.T) and Dutch lithography specialist ASML Holding NV (ASML.AS), are companies that make equipment needed to make highly advanced chips, and their governments’ adoption of U.S. curbs would mark a major shift.

The Dutch government has restricted ASML from shipping its most advanced equipment to China since 2019, but curbs announced by Washington in October go further. ASML declined to comment.

A spokesperson for Tokyo Electron said the company was in no position to respond, since the matter had to do with each country’s regulations.

China is Tokyo Electron’s largest market, accounting for 26% of its sales of 1.94 trillion yen ($14.1 billion) in chipmaking equipment for the year that ended in March.

For Japanese chip-testing equipment maker Advantest Corp (6857.T), China is the second-largest market, after Taiwan. Orders of 189 billion yen came in from China in the previous business year, or 27% of its total.

ASML said in November its financial outlook through 2030 would not be impacted by a total ban on equipment sales to China. The company, which cannot currently meet demand, could sell the 15% of its order backlog currently destined for Chinese customers elsewhere.

In another development underlining ties between Tokyo and Washington, IBM Corp and Rapidus, a newly formed chipmaker backed by Japan, unveiled a partnership on Tuesday that aims to make the world’s most advanced chips in Japan by the second half of the decade.

($1=137.5500 yen)

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