The U.S. has persuaded two other countries to join in expanding a ban on Chinese exports of chipmaking technology, Bloomberg reported. The move could limit China’s homegrown chip industry, as there are few other sources of the cutting-edge technology needed for modern semiconductor manufacturing.
As part of a broader trade war with China, the United States has sought to impose an embargo on chip technology from Japan and the Netherlands, home to some of the world’s largest makers of semiconductor manufacturing equipment. It first imposed restrictions on chip exports to China in 2015 and extended them twice in 2021 and 2022. The most recent restrictions were imposed in December.
It has banned the export of AI hardware such as graphics processing units (GPUs), tensor processing units (TPUs) and other advanced application-specific integrated circuits (ASICS), as well as the latest extreme ultraviolet lithography (EUV) equipment used in manufacturing. They, the Dutch government followed suit. The Netherlands is home to ASML, the only EUV tool manufacturer.
The US has now persuaded the Netherlands and Japan to join in banning the transfer of some older deep ultraviolet (DUV) lithography equipment. ASML is doing the same, and Japan is home to DUV equipment makers such as Canon, Nikon and Tokyo Electron Co Ltd, making the two countries key to U.S. plans to erode China’s dominance in the broader microchip market.
Compared with newer chips made using EUV machines, such as those used in Apple’s latest iPhones, the larger, older microchips made using DUV equipment are mainly used in automotive and industrial applications.
The three countries finally reached an agreement on Jan. 27, 2022, to limit the export of some DUV equipment, according to Bloomberg.
“This is a major escalation as it moves from preventing China from entering the high-end segment and hindering its current semiconductor industry,” said Josep Bori, director of thematic intelligence research at analytics and consulting firm GlobalData.
In October, the Biden administration imposed restrictions on certain exports to China to cripple its ability to produce newer, smaller and smarter semiconductors.
The restrictions include a ban on the export of advanced computing chips and the equipment containing them, as well as certain semiconductor manufacturing items, including extreme ultraviolet lithography machines.
Then in mid-December, the government expanded those restrictions to block access to U.S. chip technology for another 36 Chinese institutions and chipmakers, including Yangtze Memory Technology Corporation (YMTC), the world’s largest contract chipmaker.
The export ban includes restrictions on semiconductors used in artificial intelligence hardware, such as graphics processing units (GPUs), tensor processing units (TPUs), and other advanced application-specific integrated circuits (ASICS).
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Asif Anwar, executive director of Strategy’s global automotive practice, said joint restrictions by the three countries could be the answer to America’s problems, as previous restrictions may not be enough to prevent China from making advanced vehicles tuned for artificial intelligence tasks. ChIP-planned analysis.
Anwar added that support from Japan and the Netherlands could help the U.S. stop China from making more advanced semiconductors.
Bloomberg said the discussions among the three countries were taking place privately and there were no plans to announce the outcome. It cited sources as saying the Netherlands would extend restrictions on ASML Holdings to prevent the company from exporting some DUV lithography machines, which are critical to industrial production lines used to make electronic chips. Similarly, Japan will impose a similar ban on Nikon, the sources said.
According to Strategy Analytics’ Anwar, these companies are key. “Companies such as ASML and Nikon can play a bigger role in ensuring that China does not have the capacity to manufacture more advanced chips domestically that will support the next phase of IT/enterprise data centers, self-driving cars and AI applications. Other markets ,”He said.
“Currently, the ASML CEO expects sales in China to remain stable with restrictions in 2023, so this limits the effectiveness of the US chip control policy,” Anwar added.
ASML posted 2022 revenue of 21.2 billion euros ($22.7 billion). China bought 14% of the systems it manufactured.
political pressure
The US appears to be using its political clout at the global level to bring countries such as the Netherlands and Japan to the table, experts say
“We don’t believe that ASML’s compliance with these prohibitions is merely a matter of good faith (and ultimately political pressure). The fact is that the US has full jurisdiction over ASML’s San Diego subsidiary, Cymer – the sole intellectual property owner and manufacturer of key components, Namely laser-produced plasma (LPP) EUV lithography light sources – which means Washington effectively holds the nuclear button,” said GlobalData’s Bori.
It also means the US has the ability to severely disrupt ASML’s EUV business if it fails to comply with the proposed broader export ban, Bori said.
Additionally, ASML’s management team has made public statements in recent weeks emphasizing the uneven impact of the Chinese export ban on ASML and its US counterparts such as Applied Materials, KLA and Lam Research.
“Of course, the Dutch government is sensitive to ASML’s claims and its own national interests, given that ongoing difficult discussions on trade disputes, industrial strategy, national security and foreign relations must take place during private official meetings,” Bori said.
China’s response
Any new restrictions resulting from Japan and the Netherlands siding with the United States could encourage the Chinese to seek other technologies and accelerate the development of their own capabilities, Anwar said.
“So, for example, we should expect a shift from Intel x86 and ARM-based processors to the RISC-V open standard instruction set architecture to be part of the solutions developed by Chinese companies,” he said.
In time, this will disadvantage the international semiconductor supply base as Chinese industry will no longer be dependent on their technology, Anwar said, adding that it could even open up another front of competition.
“If these RISC-based solutions are accepted domestically as fit for purpose, they can also be sold internationally to other countries.”
However, G. Dan Hutcheson, vice chairman of market research firm TechInsights, said China has been struggling to implement its “Made in China 2025” plan.
Under the banner of “Made in China 2025,” the country has set itself a ten-year goal of making 70 percent of core materials in industrial products domestically by 2025 — including semiconductors and semiconductor manufacturing equipment.
“It turns out that replicating these devices is much more difficult for China than it was for Japan to build up the device industry in the 1970s,” Hutchison said.
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