Chinese companies are scrambling to seek local substitutes to cut reliance on Japanese suppliers as they brace for the impact of Tokyo’s export curbs on semiconductor equipment and materials, according to corporate statements and analysts.
Under tightened export restrictions unveiled by Japan’s Ministry of Economy, Trade and Industry (METI), Japanese suppliers of 23 types of semiconductor equipment are required to obtain prior export licenses to sell to China starting from July. This follows an agreement by the US, Japan and the Netherlands to limit the export of advanced chip-making equipment to China.
As the Chinese government urges Tokyo to revoke the curbs, a number of Chinese listed companies have addressed investor concerns by saying that the measures will have a limited impact on their operations, and that they are enhancing efforts to seek domestic substitutes, according to published corporate statements.
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TCL Technology, the world’s second-largest television set maker by sales, has told investors that the company is rapidly increasing its domestic supply chain to ensure stable operations, adding that it will closely monitor changes in the restrictions and make timely adjustments.
BOE Technology Group, China’s top display panel manufacturer, said although it sees little impact from the restrictions, the company has redoubled efforts to ensure supply chain security and is promoting the localisation of raw materials to minimise risks. The Shenzhen-listed company said it has already supported dozens of upstream material and equipment partners in their efforts to develop local alternatives.
Another display maker, Shenzhen-listed Visionox, also told investors that it will “enhance innovation” in the upstream and downstream industrial supply chain, and promote localisation to ensure “a secure and controllable supply chain”.
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Chinese companies account for more than half the global display panel production capacity, but core technologies and equipment needed to make panels – such as vacuum evaporation machines – are mostly controlled by Japanese companies.
Separately, PNC Technology Group, a Shanghai-listed chip process equipment supplier, said Japan’s restrictions would not affect its wet cleaning products but the impact on other equipment remains uncertain.
The company added that it has been actively “seeking and nurturing” local suppliers to replace imports from Japan and South Korea, and that it would “strive to continuously increase the market share of domestic suppliers”.
Japan’s planned export controls are a major blow to China’s chip drive
China’s chip makers are highly dependent on photolithography, etching, and thermal processing equipment from Japan, according to a recent report from Huajin Securities. Last year, Japanese imports of lithographic steppers, ion-etching systems and thermal processing equipment accounted for 28 per cent, 31 per cent and 59 per cent of the total value of these imports, respectively, the report said, citing Chinese customs data.
Japan’s curbs are seen by some industry analysts as an opportunity for local chip companies to push for technological innovation, which aligns with the central government’s broader goals of achieving self-reliance in the sector.
Citic Securities said in a recent memo that Japan’s restrictions on China, one of the major revenue-generating regions for Japan’s chip equipment suppliers, could weaken Japan’s market share advantage in the long run.
More from South China Morning Post:
- US will be ‘sole winner’ if Japan copies chip curbs on China, Beijing’s envoy to Tokyo warns
- Tech war: Japan’s new semiconductor tool export restrictions throw a major spanner in works of China’s chip plans
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