On July 23, Japan implemented controls on 23 crucial semiconductor items to China, a move that was first announced in March this year, and that aligns the East Asian economic power with the United States in restricting China’s semiconductor ambitions.
The restrictions impact equipment “ranging from machines that deposit films on silicon wafer to devices that etch out the microscopic circuits of chips that could have military uses,” Reuters reported.
In March this year, Japan’s trade and industry minister told reporters that China was one of 160 countries and regions that would be subject to the controls. However, he added that Japan’s actions were not intended to ape U.S. policy.
In October 2022, the U.S. Commerce Department issued a broad set of prohibitions on exports of chip manufacturing equipment to China, following the bipartisan passing of the CHIPS Act the previous July.
In a speech in September 2022, National Security Adviser Jake Sullivan said that the U.S. once approached the matter on a “sliding scale” where the U.S. needed to stay only a “couple of generations ahead,” however added that this environment has changed and now the U.S. “must maintain as large of a lead as possible.”
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Top of mind for U.S. authorities is national security, with Sullivan saying previously that the chip restrictions imposed by the U.S. “are premised on straightforward national-security concerns.”
The CHIPS Act sets aside billions of dollars in funding for semiconductor manufacturing on American soil, and in other places around the globe, but also prevents all recipients of the funds from making any material expansion of semiconductors into China for a period of ten years.
The act says that “during the 10-year period beginning on the date of the award … the covered entity may not engage in any significant transaction involving the material expansion of semiconductor manufacturing capacity in the People’s Republic of China or any other foreign country of concern”
Chinese chip makers have blasted the act, saying that its intended purpose is to strangle China’s chipmaking industry, as countries China would need to go to to procure chip-making equipment from are also subject to the legislation, should they receive funds from the United States or use components manufactured in the U.S..
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‘An odd discomfort’
In conversation with Reuters, a Japanese industry ministry official said, “We feel an odd discomfort with how the U.S. is doing this. There’s no need to identify the country, all you need to do is control the item,” adding that under Japanese law, Japan can’t sanction countries unless they are involved in a conflict.
However, Japan and the U.S. agreed last May, along with other Group of Seven (G7) industrial nations, that “de-risking” from potential Chinese economic coercion was warranted.
Japan joins a growing list of nations that have placed restrictions on exports of chip-making equipment to China.
The Netherlands has announced a restriction on sales of chip-making equipment to China as well, instructing its chip-making giant ASML, and other companies, to curb exports to the red nation. The CHIPS act applies to ASML as the company uses equipment that incorporates U.S. parts.
The Wassenaar Arrangement
Of utmost concern for the U.S. and its allies, is that China’s chip-making capabilities will be used to strengthen its military, prompting governments to lobby to have chip-making tools added to a “list of weapons, dual-use goods and technologies controlled by the 42 nations that are party to the Wassenaar Arrangement established after the Cold War,” Reuters reported.
However, it is unlikely that the proposal will gain the unanimous backing required.
Jim Lewis, a former U.S. State Department and Commerce Department official told Reuters, “The Wassenaar arrangement is next to hopeless because Russia’s a member,” adding that, “You’re never going to start by getting universal consensus.”
Despite this, the Biden administration is expected to update its legislation to align with the list of tools identified to be restricted by Japan, while Japan worries that targeting China directly will prompt Beijing to retaliate economically.
Unsurprisingly, China has lashed out over the restrictions by Japan, the U.S. and other nations.
According to Reuters, Liu Pengyu, a Chinese Embassy spokesperson in Washington said the U.S. “has deliberately blockaded and hobbled Chinese companies and forcibly relocated industries and pushed for decoupling,” adding that China would, “closely follow the developments and firmly safeguard our own interests.”
Concerning Japan’s moves, Mao Ning, a Chinese foreign ministry spokeswoman, said that China is “deeply dissatisfied and regret the act,” and urged Japan to “prevent relevant measures from interfering with the normal semiconductor industry cooperation between the two countries.”
Last month, while enduring current restrictions, and anticipating Japan’s additional restrictions, China took steps to restrict the export of gallium and germanium from the country, two metals used in making semiconductors.