China Slams Japan's Export Controls on Chipmaking Equipment as Violation of Free Trade

Japan, following the lead of the United States and the Netherlands, has implemented restrictions on China's access to advanced semiconductor manufacturing equipment.

In March 2023, Japan announced its plans to tighten export regulations on 23 types of advanced semiconductor manufacturing equipment, which would become effective in July of the same year.

This decision was perceived as a response to the United States' actions in limiting chip exports to China, with the objective of impeding China's acquisition of crucial military technology.

International Standoff vs China?

Subsequently, US officials successfully convinced their counterparts in the Netherlands and Japan to participate in this growing standoff. China strongly condemned Japan's imposition of export controls, accusing it of abusing export control measures and deviating from principles of free trade.

Chinese Commerce Minister Wang Wentao urged Japan to reverse its newly announced export restrictions on chipmaking equipment, emphasizing that it would adversely impact economic and trade relations between the two nations. Nonetheless, Japan engaged in tripartite discussions with the US and the Netherlands, asserting the need to safeguard national security.

Japan's ban on China's semiconductor industry will have several negative repercussions for the Japanese economy. Japan is a significant producer of semiconductor manufacturing equipment, and China represents one of its largest markets.

Consequently, Japanese companies will be compelled to readjust their long-term marketing strategies, leading to substantial uncertainties and potential losses if access to the Chinese market is severed. As a result, Japan's own businesses are likely to suffer due to the semiconductor export ban on China, which could result in unemployment and stifle domestic innovation.

Escalating a trade war

Furthermore, this ban will harm economic and trade relations between the two countries, potentially escalating the trade war. China is Japan's primary trading partner, and the two nations have deep economic ties.

The ban's implementation may trigger a decline in trade between the two countries, adversely affecting both economies. The semiconductor industry is an integral part of the global supply chain, and any disruptions within it could have far-reaching consequences. Semiconductors are indispensable components in nearly every electronic device, and they have emerged as a crucial focal point in the power struggle between Washington and Beijing over access to critical technology.

Japan's export controls on advanced chip-making equipment specifically target 23 types of semiconductor manufacturing equipment. The restricted items encompass a broad range of high-tech equipment and materials essential for advanced chip production.

Notably, the categories of equipment subject to export controls include cleaning, deposition, lithography, and etching, all extensively used in chip manufacturing. These export controls are set to be implemented in July 2023 and are considered a retaliatory measure against the United States' tightened chip exports to China, aiming to hinder China's acquisition of critical military technology.

Approximately 10 Japanese suppliers of the 23 types of semiconductor equipment, including major semiconductor equipment manufacturers such as Tokyo Electron, Kokusai Electric, Screen Holdings, and Nikon, will be affected by Japan's semiconductor export controls. These companies will be required to obtain export licenses from the Ministry of Economy, Trade and Industry (METI) before exporting their products to China.

Export controls obstacles

The export controls will introduce additional obstacles for these companies when conducting business with China, a crucial market for their products. Given the absence of a robust domestic chip market, these restrictions will negatively impact Japanese equipment manufacturers and undermine their market development, thereby reducing their competitiveness from a regulatory perspective.

This measure is seen as a response to the United States' tightened chip exports to China, with the intention of impeding China's access to critical military technology.

In conclusion, Japan's decision to impose export controls on China's access to advanced semiconductor manufacturing equipment, in alignment with the United States and the Netherlands, has sparked tensions and raised concerns about its impact on the Japanese economy, trade relations, and the global supply chain.