Chip Away: Japan bans export of sophisticated chip-making equipment to China

But no dates for the visit were formally announced and there is uncertainty if his trip is still on after the restriction on exports to China.

Japan has been exceedingly worried about China’s assertiveness in the Indo-Pacific region — a worry that has increased after the Russian invasion of Ukraine. The Japanese government’s move is also an attempt to align its policy on export of advanced semiconductor equipment with that of the US.

America wants to prevent China from dominating global chip production and scuttle its attempt to access semiconductors that would enhance its military power. Washington has already restricted the export of such items to China. The advanced semiconductors are also used in supercomputers and artificial intelligence.

Also Read | Japan to restrict chipmaking equipment exports, aligning it with US China curbs

An intense tussle between the US and China is already on for dominating this crucial market. The US has been urging the Netherlands and Japan, the other leading manufacturers of advanced semiconductor equipment, to join the ranks against China. The Dutch government has also restricted export of advanced semiconductor equipment to China. Japan now seems to be following suit.

Japan controls the export of weapons and other civilian goods that can be diverted for military use through its Foreign Exchange and Foreign Trade Control Law. The government will have to amend the ministerial ordinance for the law to include the 23 new items subject to export controls.

The changes mean that the Ministry of Economy, Trade, and Industry will need to approve exports of such items in advance. The revised ordinance is expected to be announced officially in May and implemented in July.

Among the 23 items are products related to manufacturing equipment for extreme ultraviolet lithography, and etching equipment for stacking memory devices in three dimensions.

This equipment is necessary for making advanced high-performance logic chips used for arithmetic operations, with circuit widths of 10 to 14 nanometres or less.

The Japanese decision stems from a meeting between US President Joe Biden and Japanese Prime Minister Fumio Kishida in Washington early this year.

The possibility of Japan restricting the export of some advanced semiconductor equipment to China had set off alarm bells among Chinese clients in February, when traders of second-hand machines in China reported a notable surge in enquiries.

According to the South China Morning Post, the uncertainty fuelled anxiety among Chinese factories that were in need of foreign machines to expand or upgrade production.

The Japanese finance ministry data showed that in 2022 Japan’s export of semiconductor machinery to China had dropped 1.7 percent to $74 billion, when its global exports of such machinery had increased 4.1 percent.

If Japan cuts China’s access it would deal a heavy blow to the Chinese chip sector when it is trying to diversify its supply chain in the face of growing US sanctions, by procuring alternatives from Japan and the Netherlands.
In October, the US had limited sales of advanced semiconductors to China and restricted its ability to make such chips at home.

The Netherlands also banned the sale of extreme ultraviolet lithography equipment and also plans to restrict the export of some of its less advanced deep ultraviolet lithography equipment to China.

According to Chris Miller, an expert on the subject and author of “Chip War,” though the US and its allies have the most advanced chip technology, they should remain cautious about China’s impact on the market for less-advanced semiconductors.

He said in an interview in Taiwan recently that China already has the production technologies and capacity to churn out large amounts of less advanced ships. Therefore, it was important to monitor what policy it adopts in the coming days to see its impact on the global industry.

Some Japanese politicians feel that Japan would opt for milder chip-equipment curbs on China than the US. Despite their outstanding differences, both Japan and China are keen that existing tension in bilateral relations does not turn into a conflict.

Chinese President Xi Jinping and Japanese Prime Minister Fumio Kishida had met on the sidelines of the Asia Pacific Economic Cooperation summit in Thailand last November. After their 45-minute meeting, both leaders had agreed to maintain high-level contact. The proposed visit of the Japanese Foreign Minister to China could be seen in that context.

One of the immediate tasks of Hayashi will be to secure the release of a Japanese national being held in China on espionage charges.

Observers say that at a time when Beijing believes that Japan sees it more as a rival and threat than friend and partner, one is not sure how successful the Japanese Foreign Minister’s visit will be.