Japan will restrict exports of chipmaking equipment because it is in line with US restrictions imposed by China

TOKYO (Reuters) – Japan said on Friday it would restrict exports of 23 types of semiconductor manufacturing equipment, matching its controls on technology trade with the United States’ push to limit China’s ability to make advanced chips.

Japan, home to major global chip equipment manufacturers such as Nikon Corp (7731.T) and Tokyo Electron Ltd (8035.T), has not identified China as a target of the measures, saying the equipment makers would need to get export permission for all. Regions.

“We fulfill our responsibility as a technology nation to contribute to international peace and stability,” Economy, Trade and Industry Minister Yasutoshi Nishimura told a news conference.

He said Japan wants to stop using advanced technology for military purposes and does not have a single country in mind with these measures.

But Japan’s decision is seen as a major diplomatic victory for US President Joe Biden’s administration, which in October announced sweeping restrictions on China’s access to US chipmaking technology to slow its technological and military advance.

Without the cooperation of industry heavyweights Japan and the Netherlands, US measures will be ineffective and its companies will face a competitive disadvantage.

Sources said earlier that Japan and the Netherlands agreed in January to join the United States in restricting exports of equipment to China that could be used to manufacture sub-14nm chips, but they did not announce the agreement to avoid provoking China.

Japan has not publicly recognized any agreement.

A nanometer, or billionth of a meter, refers to a specific semiconductor manufacturing technology, with fewer nanometers generally meaning a chip is more advanced.

In the Netherlands, the government said in a letter to Parliament this month that it plans to restrict exports of chipmaking equipment. The market for lithography systems used to create chip microcircuits is dominated by the large Dutch company ASML Holding NV (ASML.AS).

China, which has accused the United States of being a “technological hegemon” due to its export restrictions, urged the Netherlands “not to follow export control measures by certain countries”.

Limited impact?

Japan said it would impose export controls on six categories of equipment used to make chips, including cleaning, deposition, lithography and etching.

The restrictions, which take effect from July, are likely to affect equipment manufactured by at least a dozen Japanese companies, such as Nikon, Tokyo Electron, Screen Holdings Co Ltd (7735.T) and Advantest Corp (6857.T).

Takamoto Suzuki, Marubeni’s head of economic research in China, said the measures would be a blow to Japanese equipment makers in the absence of a strong domestic chip market.

“It will undermine the market development of Japanese companies and certainly reduce their competitiveness from a regulatory point of view,” he said.

When asked about the impact, Minister Nishimura said, without elaborating, that he expected a limited impact on local businesses.

Some industry watchers point to potential sales elsewhere.

“If you take a long-term view, the impact will diminish, with new semiconductor plants starting up in places like the US and Japan,” said Takahiro Shinada, a professor at Japan’s Tohoku University.

Japan, which once dominated chip production but has seen its market share drop to around 10%, remains a major supplier of chip machinery and semiconductor materials. Tokyo Electron and Screen produces about a fifth of the world’s wafers, while Shin-Etsu Chemical Co Ltd (4063.T) and Sumco Corp (3436.T) produce the most silicon wafers.

Nikon and Advantest shares rose 0.8% and 1.9% respectively after the news, broadly in line with the broader market (.N225) rising 1.1%. Tokyo Electron and screen have been changed slightly.

“We will continue to comply with any rules and work to maximize our results within them,” said a Nikon spokesperson.

Tokyo Electron and Advantest declined to comment.

Additional reporting by Tim Kelly, Miho Uranaka, Kiyoshi Takenaka and Mayo Sakoda; Edited by Christopher Cushing

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