Japan follows the US and the Netherlands in restricting the export of chip-making equipment

After months of pressure from Washington, Japan has joined the US and the Netherlands in restriction the export of advanced chip-making equipment, as the technology race with China ramps up.

As suggested in our recent blog (‘The Netherlands imposes restrictions on the export of chip-making equipment to China’), Japan has followed suit and from 23 July imposed export controls on advanced semiconductor technologies. Again, Japan has not explicitly identified China as the reason, but following months of pressure from the US and a similar move by ASML of the Netherlands, it is broadly considered that China is the target in the ongoing technology race. Taiwan has also pledged that it will follow Washington’s lead in the near future.

Tokyo listed 23 chip technologies that are now subject to export restrictions and require a license to sell to 160 countries. Restricted technologies include advanced microchip technologies around cleaning, deposition, lithography and etching of microscopic circuits.

According to Japan's Diamond Weekly, five Chinese semiconductor firms will bear the brunt of the trade restrictions – Semiconductor Manufacturing International Corporation (SMIC), Hua Hong Semiconductor, Huali Microelectronics, Yangtze Memory Technologies (YMTC) and ChangXin Memory Technologies (CXMT).

Japan: The largest exporter of chip-making equipment to China

More broadly, the controls are likely to hinder China’s ability to manufacture advanced chips, with the United Nations ranking Japan as the largest supplier of semiconductor equipment to China in 2022. Japan has accounted for around one-third of Chinese imports of chip-making equipment since 2015. Interestingly, Western media reports that Chinese imports of equipment from Japan increased more than 40 per cent between May and June 2023, as local chip makers rushed to stock up ahead of Tokyo’s new export restrictions.

China is already shifting production to less advanced chips as US, Dutch, and Japanese export restrictions increase the pressure on its chip-making capabilities. Japan’s latest restrictions include all the etching, film-forming, cleaning, thermal, and front-end testing equipment required for the manufacture of 14nm chips.

While China has the capability to produce 14nm chips, it can only do so at low volumes, and the restrictions from the US, Japan, and The Netherlands, means that Chinese foundries will struggle to increase output of sub-20nm chips i.e., advanced semiconductors. The smaller the width of the circuits, the more transistors can be packed on a chip, and the distance for electrons to travel between transistors is smaller, meaning faster performance, lower heat production, and lower energy requirements.

Limiting China’s ability to manufacture advanced chips

As the technology race hots up, Samsung has recently announced that it expects to be able to mass produce 2nm chips by 2025. Notably, the head of South Korean Samsung's device solutions division, Kyung Kye-hyun, met with Japan’s Prime Minister Fumio Kishida in June, when they discussed Samsung’s intention to build a ¥30 billion ($215.9 million) research and development facility for semiconductors in Japan. Likewise, Intel from the US and Rapidus from Japan are also targeting 2nm technology.

While, these latest restrictions do not specifically target China, Japan’s announcement was met with anger from Beijing. On 24 July, the day after the announcement, Mao Ning, a spokesperson for the Chinese Foreign Ministry, told reporters: “In disregard of China's serious concerns, Japan insisted on making and implementing export control measures that are clearly aimed at China. … We will closely monitor the impact of measures and resolutely safeguard our own interests.”

Pamir is closely monitoring further inevitable moves in this increasingly significant technology race.