TOKYO: Japan and the Netherlands have agreed in principle to join the United States in tightening controls over the export of advanced chipmaking machinery to China, according to people familiar with the matter, potentially dealing a debilitating blow to Beijing’s technology ambitions.
The two countries are likely to announce in the coming weeks that they will adopt at least some of the sweeping measures the US rolled out in October.
Those curbs are meant to restrict the sale of advanced semiconductor manufacturing equipment to China, according to the people, who asked not to be named because they are not authorised to speak publicly on the matter.
The Biden administration has said the measures are aimed at preventing Beijing’s military from obtaining advanced semiconductors.
The three-country alliance would represent a near-total blockade of China’s ability to buy the equipment necessary to make leading-edge chips.
The US rules restricted the supply from American gear suppliers Applied Materials Inc, Lam Research Corp and KLA Corp.
Japan’s Tokyo Electron Ltd and Dutch lithography specialist ASML Holding NV are the two other critical suppliers that the US needed to make the sanctions effective, making their governments’ adoption of the export curbs a significant milestone.
“There’s no way China can build a leading-edge industry on their own. No chance,” said Sanford C. Bernstein analyst Stacy Rasgon.
On Monday, China filed a dispute over US export controls with the World Trade Organisation, the country’s Commerce Ministry said in a statement. Beijing said the restrictions threaten the stability of the global supply chain and that America’s national security justification is dubious.
But the global opposition to China’s chipmaking ambitions appears to be mounting.
Bloomberg News reported last week that Dutch officials were planning new export controls on China.
The Japanese government agreed to similar restrictions in recent weeks since the two countries wanted to act in concert, the people said.
According to one of the sources, Japan had to overcome opposition from domestic companies that did not want to lose sales to China.
Beside Tokyo Electron, Nikon Corp and Canon Inc are minor players in the market.
Japan is in discussion with the US and other countries regarding the matter, Japanese Trade Minister Yasutoshi Nishimura said yesterday at a press conference, declining to comment on the status of ongoing talks.
“We are conducting hearings on domestic firms and studying the impact of the US restrictions.”
The three countries are the world’s top sources of the machinery and expertise needed to make advanced semiconductors. ASML shares closed down 1.4%, paring an earlier decline of as much as 2.8%.
According to Bloomberg, senior US National Security Council official Tarun Chhabra and Under Secretary of Commerce for Industry and Security Alan Estevez were in the Netherlands late November to discuss export controls, while Commerce Secretary Gina Raimondo spoke with Economy, Trade and Industry Ministry chief Yasutoshi Nishimura via teleconference last week.
With the move, Dutch and Japanese officials will essentially codify and expand their existing export control measures to further restrict China’s access to cutting-edge chip technologies.
The two governments are planning to impose a ban on the sale of machinery capable of fabricating 14-nanometer or more advanced chips to China, the people said.
The measures align with some rules Washington set out in October.
The 14nm technology is at least three generations behind the latest advances available on the market.
However, it is already the second-best technology that China’s leading chipmaking company Semiconductor Manufacturing International Corp owns.
Asked at a briefing Monday in Washington about a potential agreement with Japan and the Netherlands, US National Security Advisor Jake Sullivan said: “I’m not going to get ahead of any announcements.
“We are pleased with the candor, the substance and the intensity of the discussions that are taking place across a broad range of countries that share our concerns and would like to see broad alignment as we go forward,” he said.
“Alignment is a priority for us. We’re working towards that.” — Bloomberg