Japan and the Netherlands join U.S. chip curbs to China
The trilateral agreement will deal yet another blow to China’s ability to access and produce advanced semiconductors. But Beijing is already up and running in the race to make chips at home.
Japan and the Netherlands agreed on Friday to join U.S.-led efforts to curb sales of advanced chipmaking technology to China, dealing another blow to Beijing’s push for self-sufficiency in its semiconductor industry.
The trilateral agreement has not yet been formally announced by any of the involved governments. But the deal, first reported by Bloomberg, will expand on the unilateral export controls that the Biden administration rolled out last October — a sweeping move intended to restrict the flow of the critical technology to China.
While Washington claims that the controls will bar the Chinese military from using chipmaking technology to develop advanced weapons, Beijing has called the curbs a protectionist policy that violates international trade rules: In December, China initiated a dispute against the U.S. at the World Trade Organization (WTO), reiterating those claims.
The U.S. curbs are “a tool and weapon and bringing down market rules and the international economic and trade order,” Chinese foreign ministry spokesperson Máo Níng 毛宁 said today, without mentioning the latest development. She also said that the restrictions “destabilize global industrial and supply chains” and accused Washington of “abusing export controls” and trying to “hold on to its hegemony” and contain China.
Semiconductor wars
Once a competition between corporate heavyweights, the race to produce semiconductors has been co-opted by governments that are pouring money into building chips at home. The critical pieces of technology are used in everything from cellphones and kitchen appliances to electric vehicles and advanced weaponry. But the entire chip industry has been become dependent on a global supply chain, meaning that the current way to produce a single chip depends on the smooth flow of parts between a host of different countries.
Japan, the Netherlands, and the U.S. — the three countries involved in the deal — currently dominate the production of high-end chipmaking gear, largely through companies like Dutch-based ASML, Japan’s Tokyo Electron and Nikon, and U.S.’s Applied Materials. The alliance will further “kneecap” China’s goals to become a global chipmaking power, though ASML chief Peter Wennink said last week that the curbs will only push China towards developing its own technologies.
China’s chipmaking at home
But any new changes from the deal could take years to implement, in part due to the geopolitical sensitivities of such targeted curbs, as well as the complicated process of sorting out how the controls will take shape. Meanwhile, China has already been on a drive to semiconductor self-sufficiency in a bid to reduce reliance on foreign chipmakers.
Though China has lagged behind the rest of the world in making and producing chips, a flurry of domestic firms have emerged in the past two decades, largely due to hefty government support through China’s roughly 340 billion yuan ($47 billion) state-backed semiconductor fund, most commonly known as Big Fund.
Despite a government crackdown on corruption against beneficiaries of Big Fund since July, Beijing has been retooling its financing approach to boost its semiconductor industry. In December, reports suggested that Chinese officials are preparing a nearly 1 trillion yuan ($150 billion) package, including tax incentives and other financing perks, for Chinese companies to buy semiconductor equipment manufactured by other Chinese firms.
And while China’s biggest companies, such as Naura and Shanghai Micro Electronics Equipment (SMEE), are also still lagging behind their rivals in their ability to produce the most advanced chips, any real teeth from the deal will stem from what type of technologies get included in the ban.
“Our business in China is predominantly directed at mature nodes,” ASML said in a statement to Chinese state-run nationalist tabloid the Global Times on Saturday. “Meanwhile, ASML’s business activities globally will continue. What we need now is stability and reliability in our industry to avoid further disturbances in the global semiconductor industry.”
