TOKYO EXPORT CURBS SET TO UPSET BEIJING’S PLAN

Analysts say restrictions on 23 types of items go beyond those imposed by US and look intended to plug all alternative procurement sources in Japan

Japan’s new export restrictions on chip-related equipment and materials, which will come into effect next month, are set to disrupt China’s semiconductor self-sufficiency plan as the items are highly selective and targeted, industry insiders say.

The measures require specific permission for the export of 23 types of items to any country not on a list of 42 “friendly” markets, according to the insiders and a list seen by the Post.

For China, it would be a de facto ban, similar to US export curbs announced last October, dealing a heavy blow to its push for greater self-sufficiency in chips.

Beijing has expressed anger at Tokyo’s decision to implement the curbs and urged a rethink, but there is little sign the decision will be suspended or revoked.

Japan, similar to the Netherlands, has not explicitly referenced China in its export control announcements. Instead, officials have said the exports fall under the Foreign Exchange and Foreign Trade Act, which regulates the export of Japanese weapons and other goods that can be converted into military applications.

The restricted items on the list are expansive and will target a range of hi-tech equipment and materials needed for advanced chip production.

Analysts say the restrictions move beyond limitations the United States has imposed on the country. For instance, certain deep ultraviolet lithography equipment, which print chips on wafers with a 193-nanometre light source and can push chip-making technology to 14nm, will be targeted, according to the list seen by the Post.

“My feeling is the list is intended to plug all the alternative procurement sources from Japan where Chinese companies could turn to,” said one chip equipment investor, who asked not to be named, adding the restrictions could be “devastating” for China’s chip-making industry, which was already struggling due to US sanctions.

Chinese chip makers have turned to non-US suppliers, mostly from Japan, the Netherlands and Germany, over the past three years to cut out use of American parts in their fabs, industry experts say.

Japan is a key player in the global chip supply chain with a monopoly in niche areas, which Tokyo has used against Seoul. In 2019, it tightened controls on exports to South Korea of three materials – fluorinated polyimide, resists and hydrogen fluoride – for chips and display production, disrupting Seoul’s downstream industries. The export controls only ended this year when the two sides mended their ties.

According to UN Comtrade data, Japan was the top exporter to China of chip-manufacturing equipment last year, hence Beijing’s diplomatic pressure on Tokyo to reverse course.

Last week, Commerce Minister Wang Wentao told his Japanese counterpart, Yasutoshi Nishimura, Tokyo must halt the curbs as they violated global trade rules.

Arisa Liu, a research director at the Taiwan Institute of Economic Research, said the restrictions appeared “harsher than expected”, meaning stronger headwinds for China.

“Apart from advanced nodes that have already been restricted, capacity expansions on 14nm node and mature 28nm node are also likely to be affected,” Liu said.

Most tools on the list are machinery needed in front-end chip-making, which involves lithography, etching, film deposition, coating, developing and cleaning. The restrictions may cover second-hand equipment as well, according to the chip equipment investor.

The largest firms that sell equipment used to produce cutting-edge chips are in the US, the Netherlands and Japan, such as Applied Materials, ASML and Tokyo Electron.

“If Japan follows suit [with the US] to fully restrict the export of [chip-making] machines, China’s research and development in [chip-making] will be screwed,” an engineer at a Beijing-based semiconductor equipment maker said.