Japan is set to officially tighten export controls on 23 semiconductor equipment items to China, starting in July, following the US-led containment against Chinese semiconductor industry. While it was not explicitly mentioned military concerns was key to the strict restrictions, it is a common global speculation given the current tense geopolitical climate.
The decision not only meets strong repercussions from Beijing, but will also impact Japanese equipment suppliers more than their counterparts in the US and the Netherlands, given their higher market shares in China. Japan’s news media Nikkei and Jiji recently reported that under the tightened export restrictions, Japanese suppliers of the 23 types of semiconductor equipment are required to obtain prior export licenses from the Ministry of Economy, Trade and Industry (METI) for their products destined for China.
The equipment items affected are mostly associated with 10-14nm and more advanced chips manufacturing process nodes. The reports said around 10 Japanese suppliers will be affected by the export control measure, including largest semiconductor equipment maker Tokyo Electron, Kokusai Electric, Ulvac, ArF immersion exposure equipment vendor Nikon, etching equipment manufacturer Hitachi High-Tech, cleaning equipment specialist Screen and IC testing equipment supplier Advantest.
Some suppliers lamented that Japan’s export control regulations are more ambiguous than their US counterparts, and they have to learn more about how the regulations will be implemented and what the possible impacts will be. Statistics from the International Trade Center (ITC) under World Trade Organization (WTO) found total global semiconductor equipment exports to China came to US$41.0 billion in 2021, with Japan contributing US$11.8 billion for a 29% share of the Chinese market, much higher than US$6.8 billion contributed by the US and US$2.5 billion from the Netherlands.
Meanwhile, Japan’s global semiconductor equipment exports reached US$30.5 billion in 2021, with 39% of which going to China. In comparison, only 26% and 12.5% of the US and Dutch semiconductor equipment exports head to China. In terms of individual suppliers, Tokyo Electron’s sales to China accounted for 26% of its total annual shipments in 2021, while in 2022, for every five ArF immersion exposure machines sold by Nikon, one was delivered to China.
All the figures mentioned above are evident that the China market is much more important to Japanese suppliers than to their competitors in the US and the Netherlands. China is trying to counter the export restrictions from Japan and other countries: Chinese foreign minister Qin Gang just told Japanese Foreign Minister Yoshimasa Hayashi, who is visiting China, that the US suppressed Japan’s semiconductor industry in the past and is now doing the same to China, hoping that Japan will not join the US-initiated containment scheme.
China’s Ministry of Commerce also issued a statement on 4 April 2023 asking Japan to correct its measures of tightening export controls on semiconductor equipment, warning that it would take critical measures to protect China’s interests if the semiconductor cooperation between the two countries is hindered.
Additionally, China has filed a proposal with the Council for Trade in Goods under WTO, requesting the WTO to investigate the existence of semiconductor export control agreements among the US, Japan and the Netherlands and strengthen supervision of the restrictive measures against China. However, the countries said national security issues are beyond WTO norms.
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