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Japan to curb exports of chip-making equipment as it adapts to US China restrictions

 Japan announced on Friday that it would limit exports of 23 types of semiconductor manufacturing equipment, aligning its technology trade controls with US pressure to curb China’s ability to make advanced chips.

Japan, home to the world’s major chip makers such as Nikon Corp and Tokyo Electron Ltd, did not specify China as a target of the measures, saying device makers would have to apply for export permits for all regions.

Economy, Trade and Industry Minister Yasutoshi Nishimura said at a press conference “We are fulfilling our responsibility as a technological nation to contribute to international peace and stability, Japan wants to stop the use of advanced technology for military purposes and does not have one specific country in mind with the measures”.

But Japan’s decision is seen as a major diplomatic victory for US President Joe Biden’s administration, which in October announced sweeping restrictions on China’s access to US chip-making technology to slow its technological and military advances.

Without the cooperation of industrial heavyweights Japan and the Netherlands, US measures would be ineffective and their companies would face a competitive disadvantage.

Japan and the Netherlands agreed in January to join the U.S. in limiting exports to China of equipment that could be used to make sub-14-nanometer chips, but did not announce the pact to avoid provoking China, the sources said earlier.

Japan has never publicly acknowledged any agreement

A nanometer, or one-billionth of a meter, refers to a specific semiconductor industry technology, with fewer nanometers generally meaning the chip is more advanced. In the Netherlands, the government said in a letter to parliament this month that it plans to limit exports of chip-making equipment. Dutch major ASML Holding NV dominates the market for lithography systems used to create minute chip circuits.

China, which has accused the US of being a “technological hegemony” because of its export restrictions, has called on the Netherlands to “disobey some countries’ export control measures”.

Limited impact?

Japan said it would impose export controls on six categories of equipment used in chip manufacturing, including cleaning, deposition, lithography and etching.

The restrictions, effective from July, are likely to affect devices made by at least a dozen Japanese companies such as Nikon, Tokyo Electron, Screen Holdings Co Ltd and Advantest Corp.

Takamoto Suzuki, head of economic research for Marubeni in China, said “the measures would be a blow to Japanese device makers given the absence of a strong domestic chip market, It will undermine the market development of Japanese companies and will certainly reduce their competitiveness from a regulatory perspective”.

Asked about the impact, Minister Nishimura said without elaborating that he expected a limited impact on domestic companies. Some industry watchers point to potential sales elsewhere.

Takahiro Shinada, a professor at Japan’s Tohoku University says “If you look at the long term, the effect will diminish as new semiconductor plants come on stream in places like the United States and Japan”.

Japan, which once dominated chip manufacturing but has seen its market share drop to around 10%, is still a major supplier of chip machinery and semiconductor materials. Tokyo Electron and Screen make about a fifth of the world’s chip tools, while Shin-Etsu Chemical Co Ltd and Sumco Corp make most of the silicon wafers.

Shares of Nikon and Advantest rose 0.8% and 1.9% on the news, roughly in line with the broader market’s rise of 1.1%. Tokyo Electron and Screen were little changed. “We will continue to follow all the rules and work to maximize our results within them,” a Nikon spokesperson said.

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