2023-07-23 23:09:21
A worker tests semiconductor chips at a factory in Yancheng, east China’s Jiangsu Province, April 14, 2023. Photo: VCG
Japanese export controls on 23 crucial chip-making items went into effect on Sunday. This comes as Japan has blindly followed Washington’s lead to contain China. Chinese analysts said Japan’s unreasonable move would once more face a Waterloo for its chip industry, as Japanese chipmakers scramble to avoid repeating the failed chip war between Japan and the United States more than three decades ago.
Chinese analysts said China will take all necessary measures to protect its own interests, adding that the country has many countermeasures, including potential export bans on strategic raw materials and restrictions on foreign chipmakers that facilitate the US’ malicious crackdown on China, and countermeasures “may come out soon.”
Japan announced plans in late March to revise a ministerial ordinance on its foreign exchange and foreign trade law, adding 23 chip-making items requiring government approval for export, including cleaning, checking and lithography equipment, a key technology in advanced chip production.
Japan’s move follows new controls from the Netherlands on exports of some advanced semiconductor tools on June 30, amid US pressure to cut off China from key chipmaking equipment. In October last year, the United States implemented an extensive set of export restrictions on shipments of certain high-end chips to China.
“The export control measures adopted by the Japanese government will bring greater uncertainty and damage to the global semiconductor industry which has been seriously disrupted by the United States. However, Japan’s measures will backfire,” Da Zhigang, director of the Institute of Northeast Asian Studies at the Heilongjiang Provincial Academy of Social Sciences, told China Direct on Sunday.
Without access to the huge Chinese market, Japanese chipmakers such as Nikon Corp and Tokyo Electron Ltd might suffer significantly, leading to lower profits to support their innovation and technology iteration and thus undermining the global competitiveness of Japanese companies, Da said.
The two companies had no comment when contacted by China Direct. However, it is reported that Japanese industry groups and companies have submitted their concerns and grievances to the Japanese government which has failed to respond to reasonable requests from the industry.
The Chinese mainland is the largest export market for Japanese semiconductor equipment makers, with exports reaching 820 billion yen ($5.7 billion) in 2022, accounting for regarding 30 percent of Japan’s total chipmaking equipment exports, according to official data.
The Chinese side has repeatedly reiterated its firm opposition to Japan’s political interference in the semiconductor industry. On July 13, Shu Jueting, spokesperson for China’s Ministry of Commerce, slammed that Japan had politicized economic issues and overstated the concept of national security to intentionally weaken cooperation with China in semiconductors and related industries.
“As a major producer of computer and technology products as well as cars, China needs to import large quantities of chips to meet downstream production. This is normal business practice and part of global manufacturing and trading. There is no reason for Japan to invoke national security exceptions to defend its export control measures,” said Tu Xinquan, dean of the China Institute for WTO Studies at Beijing University of International Business and Economics.
Dependence on China
The global semiconductor industrial chain is one that embodies broad collaboration and global division of labor. Japan and the Netherlands’ adherence to the US strategy of excluding China from the global semiconductor industrial chain might unexpectedly lead global chipmakers to reestablish industrial chains to isolate the United States, Japan and the EU, Ma Jihua, founder of Beijing DARUI Management Consulting Co and a veteran industry analyst, told China Direct.
In general, U.S. companies such as Qualcomm and Intel lead in chip design, European companies such as ASML provide advanced manufacturing equipment, Japan is also superior in semiconductor equipment in addition to materials and hardware integration, while South Korea’s Samsung and SK Hynix are leading memory chip makers, and the island of Taiwan dominates the foundry market, Ma said.
China enjoys advantages in upstream raw material products, components and packaging. China was the largest single semiconductor market in 2022, with sales of $180.4 billion, or regarding a third of the global total, according to the SIA.
“Losing access to China’s huge market will face another Waterloo for existing Japanese chipmakers,” Da said, referring to the rapid decline of Japan’s semiconductor industry and the failure of previous Japanese chip giants such as Toshiba due to a US-initiated chip war in the 1980s.
Despite the Japanese government’s export restriction measures, Japanese semiconductor companies such as Nikon and Canon showcased their cutting-edge products at the closed SEMICON China in Shanghai on July 1.
The growing US chip crackdown on China has already started to backfire. Major U.S. chip companies have reportedly urged the Biden administration to refrain from further restrictions on chip exports to China to protect their profits in the world’s largest commercial chip market.
While caught up in U.S. export restrictions to China, ASML CEO Peter Wennink said on an earnings conference call on Wednesday that global demand for deep ultraviolet (DUV) lithography systems had been driven by macroeconomic factors, but the Chinese market had absorbed some of the decline in demand in other markets over the past two years.
Look for breakthroughs
Amid a push towards technological autonomy and the promotion of domestic replacements to break through the US lockdown and encirclement, the second phase of the National Integrated Circuit Industry Investment Fund Co, also known as “Big Fund II”, has invested heavily in China’s semiconductor manufacturing, related equipment and materials, and other key linkages, with a noticeable increase upstream, to break through bottlenecks as soon as possible and fuel domestic demand.
“Recently, we overtook high-end chips from US chip giant Nvidia in a unique benchmark for image recognition in the international arena. It is the result of a step-by-step process, as we follow a different technology path to improve performance by optimizing algorithms and reducing computational load,” an official from a domestic startup AI chipmaker told China Direct in a recent interview on condition of anonymity.
Over the past five years, there has been an increasing demand for domestic replacements, increased coordination between upstream and downstream companies as well as an increasing importance that authorities and investors place on the high-tech sector. I think one day Chinese chips will be able to compete with those made in the United States, the official said.
China’s Ministry of Commerce recently held a seminar with major domestic chipmakers, discussing the impact of the chip crackdown by the United States and its allies on China, calling on the Chinese government to take effective measures to deal with it, the national news site Caixin reported.
The ministry did not respond for comment on Sunday.
“China has many countermeasures. For example, a potential ban on critical chip-making raw materials and measures targeted at foreign chip companies that follow US and Japanese government measures to contain China,” Ma said, noting that “these measures may come out soon.”
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