Chip War Against China: Japan, Netherlands to Join US in Denying Beijing Advanced Semiconductor Technology – Report

Japan and the Netherlands are on course to finalizing stringent export controls that would aim at crippling the Chinese semiconductor industry, which is reeling from the control measures the US unveiled last year.

Bloomberg reported that Japanese Prime Minister Fumio Kishida and the Dutch Prime Minister Mark Rutte held discussions with US President Joe Biden at the White House earlier this month on the controls on the Chinese chip industry. The measures are likely to be finalized by the end of January, the report said.

Key Companies

While Netherlands company ASML Holding NV controls the market for lithography technology, Tokyo Electron Ltd. rivals US companies that are key players in the chip industry.

“Without access to their state-of-the-art products and those supplied by US firms Applied Materials Inc., Lam Research Corp. and KLA Corp., Chinese companies would find it almost impossible to build production lines capable of the most advanced chip manufacturing, analysts say,” the report said.

Biden Administration Measures

In October last year, the Biden administration tightened the screws on the Chinese chipmakers by enforcing more export controls targeting them. The move sought to stop not just American companies from selling key equipment and technology to China but persuade foreign firms to do so.

The measures unveiled by President Joe Biden were aimed at closing China out of manufacturing some key semiconductor chips. The new rules further restricted toolmakers like KLA Corp, Lam Research Corp and Applied Materials Inc from shipping any equipment Chinese-owned factories that make advanced logic chips.

In September, the US Commerce Department had slapped new restrictions on chip sales to Chinese companies. As per the department’s guidance, US chipmakers must immediately procure a license to supply artificial intelligence chips to Chinese companies. The US says stringent measures are needed to ensure that AI chips are not used by the Chinese for ‘military end use’.

CHIPS Act

In another landmark move in July, the US Senate voted to move forward with the CHIPS Act that will provide a $54 billion boost to the country’s semiconductor industry. The long-delayed Senate vote fulfilled the chip industry’s demand for subsidies that will enable it to compete with China.

Japanese ruling party leader Akira Amari recently explained why Japan should join the US in reining in China’s advance in the all too crucial segment.

“Countries like China, Russia and North Korea are vying for global hegemony, and we should never help them achieve that … We must join the US in stopping exports of cutting-edge chips that can be diverted for military use and pose serious security concerns,” the ruling party heavyweight said.

The US seeks to deny China, which is the largest single market for semiconductor technology, advanced technology so that Beijing does not end up using the technology to boost its technological and military standing.

Beijing’s Incentive Package

Even as China reported a slump in its semiconductor industry due primarily to the US curbs, Beijing said in December it was unleashing a war chest of around $143 billion (roughly about 1 trillion yuan) to boost its semiconductor industry.

Beijing’s planned fiscal incentive package for the chip industry will be rolled out over the next five years, Reuters reported. The package involves subsidies and tax credits aimed at increasing semiconductor production and development. The package is aimed at stopping Washington from crippling China’s technological advancement and stymie its supercomputing prowess by curtailing the all too important chip industry.