- The Washington Times - Friday, March 31, 2023

 The government of Japan, a key node in the global semiconductor supply chain, announced Friday that it will restrict exports of top-tier computer chipmaking equipment to prevent the technologies from being used for military purposes.

Though China was not mentioned in the order, the restrictions by Japan, a close U.S. ally, are likely to please the Biden administration, which has stepped up its own campaign to choke off the supply of top-end semiconductors to Beijing from high-tech companies in the U.S. and in key allies.

The new Japanese curbs will reportedly take effect in July. Chinese semiconductor firms have been stockpiling needed supplies from Japan ahead of the anticipated export controls. the Financial Times reported.

The action was taken “to prevent our technology from being diverted for military use,” Economy, Trade and Industry Minister Yasutoshi Nishimura told the Kyodo News wire service. “We will fulfill our responsibility in the international community.”

Under the plan, which will become official after a period of public comment, Japan will make 23 items subject to export restrictions.

The Asahi Daily noted that 42 nations, including the democratic chipmaking powerhouses South Korea and Taiwan, will be exempt from the restrictions, but China will not.

The Beijing-based Global Times, which has close links to the ruling Chinese Communist Party, shot back within hours of Japan‘s move.

Japan‘s willingness to blindly follow the U.S. as its pawn in technology containment toward China may cost it dearly,” the news website warned in an article, accusing Tokyo of “shooting itself in the foot by caving to U.S. pressure on containing China.”

Mr. Nishimura told a Tokyo news conference that the government “does not have one particular country in mind with these measures,” but U.S. Ambassador to Japan Rahm Emanuel hailed the move as a victory, writing, “It’s another win for economic security and secure supply chains.”

Chips are the heart of the globe’s fast-digitizing economy, and China has struggled to produce domestically the super-fast new models that power modern technology.

The U.S. government has used critical American intellectual property in the sector as leverage to persuade allies from supplying chips and related equipment to China, warning it could be used to bolster Beijing’s fast-expanding military and intelligence capabilities.

The “chip war” is perhaps the most high-profile of the Trump government policies to be retained — and expanded — by the Biden administration.

Washington is concerned that Beijing is using various chips to train artificial intelligence systems and power advanced military and surveillance applications, and has itself announced a range of related technology export restrictions.

These policies have put the spotlight on the biggest global chip producers in Taiwan and South Korea: TSMC and Samsung Electronics. South Korea-based Samsung is the world’s biggest fabricator of memory chips, while Taiwan’s TSMC is the leading manufacturer of advanced non-memory, or logic, chips.

Although Japan is no longer a major player in semiconductor fabrication, it still plays a central role in the sector through the production and export of chemicals, components and manufacturing equipment needed by the chip companies.

“No Japan — no semiconductors!” said Scott Foster, an analyst with Tokyo-based Lightstream Research. “Japan has extremely high market shares in vital equipment and materials, things you never read about [but] that are very important.”

These include mission-critical chemicals and wafer-dicing technologies. Products from 10 companies will be subject to the stiffer export measures, including Tokyo Electron Ltd., Nikon Corp. and Screen Holdings Co., the Asahi Daily reported. These firms produce advanced lithographic and etching solutions as well as cleaning devices, Mr. Foster said.

Japan is following the example of the Netherlands, which has also been in talks with Washington over ways to deny China high-powered chips.

The Netherlands is home to ASML, a key maker of top-tier semiconductor-manufacturing machinery. In March, after months of negotiations with the U.S., the Dutch government said that it would place restrictions on exports of key chip technologies.

Complicating U.S. efforts is the reluctance of companies in such close U.S. allies as Japan, the Netherlands and South Korea to lose lucrative Chinese markets for their products. The world’s second-largest economy is a voracious buyer of chips, chip components and chipmaking equipment.

Mr. Foster said Friday’s announcement reflects lingering ambivalence in Tokyo about the restrictions on China.

“This is just the latest announcement from the Japanese government, but it is getting a little less vague each time,” Mr. Foster said. “They are putting things off as much as they can, in my opinion.”

He continued, “If they have not finished discussion with the public, that means the industry is probably not too keen on the idea — much like Holland, where it might take months and years to work out the details.”

It is clear, however, that the U.S. government believes the chip sector provides real leverage against a key competitor.

China‘s government is investing massively in the chip sector. But in an industry where the smaller the size is the better, Chinese firms are struggling to produce 14-nanometer chips, even after South Korean and Taiwanese industry leaders started fabricating 3-nanometer chips in 2022.

And Huawei, the Chinese technology flagship, has found its smartphone division crippled by U.S. sanctions.

• Andrew Salmon can be reached at asalmon@washingtontimes.com.

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