Friday, November 4, 2022
The U.S. is urging allies including Japan to follow its lead on restricting exports of advanced semiconductors and related technology to China, likely intensifying the impact of Chinese-American tensions on chipmakers worldwide.
Tokyo has begun internal discussions on the issue at Washington's request, a Japanese government insider said. Officials are weighing which restrictions can be adopted in Japan, and will watch how other U.S. allies such as the European Union and South Korea respond.
The sweeping export controls announced Oct. 7 by the U.S. Commerce Department span chipmaking equipment, design software and even engineers who support semiconductor manufacturing in China.
"We were talking to our allies. No one was surprised when we did this, and they all know that we're expecting them to cover likewise," Alan Estevez, undersecretary of commerce for industry and security, said during an event Thursday hosted by a U.S. think tank.
The curbs allow companies to apply for exemptions, but with a presumption of denial, meaning such requests are unlikely to be granted. Violators may face civil and criminal penalties.
The U.S. holds 12% of the global semiconductor market, while Taiwan and South Korea each have about a 20% share and Japan has 15%. Some American players have called for other countries to adopt U.S.-style export curbs, arguing that it is unfair for only American companies to lose out on Chinese business.
Washington anticipates that bringing allies on board with the restrictions will make it that much more challenging for Beijing to buy or make advanced semiconductors for its rapidly expanding military.
"I expect of addressing a common concern about China, then that creates an opportunity for the Japan and the U.S. governments to reduce barriers on trade between Japan and the United States," said Kevin Wolf, who served as assistant secretary of commerce for export administration in former President Barack Obama's administration.
"This will actually result in even better cooperation between Japan and the United States and fewer restrictions on joint development and production of advanced node items," Wolf added.
In addition to exports of chips and chipmaking technology, Washington's curbs restrict U.S. nationals from working at or doing business with Chinese semiconductor companies.
American engineers who were working at Chinese chip fabrication facilities are starting to return to the U.S. Dutch chip tool maker ASML Holding has told American employees to stop servicing customers in China.
Asked on Tuesday about the impact of the U.S. curbs on China, Yasutoshi Nishimura, Japan's economy, trade and industry minister, told reporters, "We are in communication with the U.S. and holding hearings with domestic companies based on that."
Japan's semiconductor industry is bracing for the possibility of similar curbs.
"If production of advanced semiconductors halts in China, there will be less of a need for high-added-value, cutting-edge production equipment, one of Japan's strengths," said a representative at a major chipmaking equipment manufacturer.
An industry group estimates China's market for chip production equipment at $22 billion this year -- 22% of the global total, behind only Taiwan and South Korea. With Tokyo's plans regarding export controls unclear, companies such as Nikon are examining the potential impact on their business.
Losing access to a leading market could further dent earnings at companies already facing a market down turn. U.S.-based chipmaking equipment company Applied Materials has downgraded its earnings forecast for the three months through Octoberdue to the new restrictions, expecting a hit to sales of between $250 million and $550 million.
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