WASHINGTON – The Netherlands and Japan – home to key suppliers of semiconductor manufacturing equipment – are close to joining a Biden administration-led effort to restrict exports of the technology to China and hobble its push into the chips industry.
The Dutch and Japanese export controls may be agreed to and finalised as soon as the end of January, said people familiar with the matter. Japan’s Prime Minister Fumio Kishida and his Dutch counterpart Mark Rutte discussed their plans with United States President Joe Biden at the White House earlier in January.
“I’m fairly confident that we will get there,” Mr Rutte said on Thursday in an interview with Bloomberg News on the sidelines of the World Economic Forum in Davos, Switzerland.
The Hague and Tokyo likely will not go as far as Washington’s restrictions, which not only limit exports of American-made machinery, but also impede US citizens from working with Chinese chipmakers. Even so, Beijing may find itself even more cut off from either the technology or know-how it needs to build the most advanced kinds of semiconductors once all three countries act.
While the US is home to the biggest group of chip-gear makers, the Netherlands boasts ASML Holding, which controls the market for lithography technology, one of the most important steps in producing the electronic components.
Japan’s Tokyo Electron is a major rival to US companies in other types of machinery.
Without access to their state-of-the-art products and those supplied by US firms Applied Materials, Lam Research and KLA, Chinese companies would find it almost impossible to build production lines capable of the most advanced chip manufacturing, analysts say.
The three firms all traded down by more than 2 per cent, in line with broader market moves.
A spokesman for the White House’s National Security Council declined to comment.
Chinese Foreign Ministry spokesman Wang Wenbin said on Friday at a regular media briefing in Beijing that the US effort showed its “selfish hegemonic interest” and that Washington was “seeking to benefit itself at the expense of its allies”.
Beijing “would follow what is developing and defend our own interests”, Mr Wang added.
The Biden administration issued sweeping new rules in October that included restrictions on the supply of US manufacturers’ most advanced chipmaking equipment to Chinese customers and limits on Americans working for Chinese semiconductor firms, a move aimed at choking off access to certain expertise.
A comment period on the Commerce Department’s rules – opposed by some US semiconductor companies but supported by lawmakers in both parties – closes on Jan 31. Republicans in Congress have pressured Commerce Secretary Gina Raimondo to crack down even tighter on Chinese chipmakers, questioning in a letter on Wednesday whether the export controls are being sufficiently enforced.
Semiconductors have become a key battleground for the growing rivalry between the world’s two largest economies. The US is the inventor and largest provider of the technology, while China is the biggest single market. Beijing’s dependence, combined with growing efforts by Washington to limit access to advanced chips and their military use, have prompted China to seek to reduce its reliance on imports.
For Mr Biden, broadening his move against China to include the Netherlands and Japan will add to its effectiveness. For the Dutch and Japanese, as for some US companies, the geopolitical concerns must be weighed against losing access to a huge market.
Texas Representative Michael McCaul, who chairs the House Foreign Affairs Committee, said: “I commend the Biden administration for working with our partners to apply export controls on equipment used to make advanced semiconductors and am eager to scrutinise the specifics of what comes out of these talks.
“A Republican Congress is ready to use its authorities to protect US national security and defend human rights, should the outcomes not substantially match the controls currently in place.”
Mr McCaul is set to meet Ms Raimondo to discuss the matter on Thursday. It is uncertain how long it will take the other countries to implement their measures.
Mr Rutte said: “It could even be something which just happens without big announcements. It’s still not clear. It depends a bit on how the discussions with various countries will evolve.”
After the US announcement in October, some American companies were forced to warn investors that they may lose out on billions of dollars in future China revenue. Since then, they have argued that it also exposes them to losing market share, if overseas competitors are allowed to continue to operate in China relatively unrestricted.
Tokyo Electron has said the general clampdown on its Chinese customers is already hurting business, whereas ASML has said demand elsewhere in the world for its most advanced products can make up for any revenue shortfall from China. BLOOMBERG