Japan has announced the addition of advanced semiconductor manufacturing equipment to its export control list. This decision is in line with U.S. actions designed to prevent advanced chip technology from reaching China. The updated list now includes twenty-three critical items essential for creating circuit patterns and testing semiconductor chips.

Impact on China’s Semiconductor Ambitions

According to industry experts, this escalation in export controls will severely limit China’s ability to import state-of-the-art chipmaking tools. Yoshiaki Takayama, a research fellow at the Japan Institute of International Affairs, noted, “Producing cutting-edge semiconductor devices will be almost hopeless for China, at least in the short and medium term.” Given the strategic importance of these technologies, this move is expected to provoke a substantial response from Beijing.

The restriction of equipment such as those used in EUV (extreme ultraviolet) lithography, crucial for developing the world’s most advanced semiconductor chips, marks a critical step in this strategic limitation. Following the U.S. imposition of enhanced controls last October, targeting chips used in supercomputers and artificial intelligence applications, Japan’s actions echo a global trend. These measures also come ahead of similar restrictions from the Netherlands, set to take effect in September.

Japan’s Leading Role and China’s Dependence

Japan is an integral player in the global semiconductor manufacturing equipment sector, with giants like Tokyo Electron and Screen Holdings leading the charge. Notably, Japan was China’s largest source of such equipment in 2022, comprising about a third of Chinese imports in this category. This dependency highlights the potential impact of Japan’s new policies.

With the new controls, suppliers will face increased reporting obligations to Japan’s Ministry of Economy, Trade, and Industry. However, a simplified application process will remain for 42 countries and territories. Despite restrictions on high-end technology, opportunities persist for Japanese suppliers in China, particularly in producing legacy chips. However, Japan must brace for potential retaliatory measures from China, such as the previously announced bans and new licensing requirements starting in August for critical semiconductor materials like gallium and germanium compounds.