Analysis: As Japan aligns with U.S. chip curbs on China, some in Tokyo feel uneasy
24/07/2023 06:54
By Tim Kelly, Karen Freifeld and Kentaro Sugiyama
TOKYO/NEW YORK, July 24 (Reuters) -
Japan's imposition of export controls on chip making tools
to align with a U.S. policy restricting China's ability to
produce advanced semiconductors is worrying some officials in
Tokyo who believe a combative U.S. approach may hamper
coordination and needlessly provoke Beijing.
From this week, Japan is restricting 23 types of equipment,
ranging from machines that deposit films on silicon wafers to
devices that etch out the microscopic circuits of chips that
could have military uses.
But, while the U.S. referenced China 20 times in its October
announcement targeting Chinese companies, Japan has chosen broad
equipment controls not specifically aimed at its bigger
neighbour.
"We feel an odd discomfort with how the U.S. is doing this.
There's no need to identify the country, all you need to do is
control the item," a Japanese industry ministry official told
Reuters. Japan can't sanction countries unless they are involved
in a conflict, the source added.
Japan's trade and industry minister told reporters when
announcing Japan's measure in March that China was only one of
160 countries and regions that would be subject to controls and
that Japan's rules were not meant to follow the U.S.
Even so,
China has warned Japan to backdown
.
Tokyo and Washington share concerns about China's push for
advanced technologies and in May agreed with other Group of
Seven industrial democracies on "de-risking" from potential
Chinese economic coercion.
However, differences in chip making equipment controls could
test that unity, should either gain a competitive advantage over
the other by allowing exports the other blocked.
"Each country is responsible for its own licensing policies,
and on top of that it's up to each country to enforce the
licensing decisions that it undertakes," said Emily Benson, the
director of the trade and technology project at the bipartisan
nonprofit Center for Strategic and International Studies in
Washington.
Japan is not applying a U.S. standard of presumption of
denial and will allow exports whenever possible, a second
Japanese government official said. The Japanese government
sources asked to remain anonymous because of the sensitivity of
the issue.
There may also be underlying tensions because unlike Japan
and the Netherlands, which will implement controls starting
September, the U.S. is not limiting restrictions to specific
tools.
"The U.S. rules still restrict other items and services the
others do not," said Washington trade lawyer Kevin Wolf.
Reuters contacted six chip tool makers in Japan. Two of
them, deposition machinery maker Kokusai Electric and Japan's
leading chip tool maker Tokyo Electron 8035.T , said they
expect Japan's controls to have a limited business impact.
Chip tester company Advantest Corp 6857.T said none of its
products are affected.
Lithography machine makers Nikon Corp 7731.T and Canon Inc
7751.T , and wafer cleaner manufacturer Screen Holdings
7735.T did not respond.
COORDINATION
Dovetailing Japan's controls with those of the U.S. and the
Netherlands will require close coordination.
"The issue in all these things is, what is it you can
let go safely and what do you need to block. Everyone draws the
line a little bit differently," said Jim Lewis, a former U.S.
State Department and Commerce Department official, and a
researcher at the Center for Strategic and International Studies
(CSIS). He has met with Japanese trade officials and believes
Tokyo is committed to curbing certain exports.
Tokyo, Amsterdam and Washington have all indicated they
would like chip tools added to a list of weapons, dual-use goods
and technologies controlled by the 42 nations that are party to
the Wassenaar Arrangement established after the Cold War.
They are unlikely, however, to win the unanimous backing
they need from its members.
"The Wassenaar arrangement is next to hopeless because
Russia's a member," said Lewis. "You're never going to start by
getting universal consensus. So, pick the guys who care and get
them to work together."
The alternative is to form a closer group with the U.S. and
the Netherlands to oversee chip manufacturing tools that could
eventually include other countries, the first Japanese industry
ministry official said.
The U.S. Commerce Department and Dutch government declined
to comment. The White House did not respond to a request for
comment.
BROADER RESTRICTIONS
In the meantime, U.S. President Joe Biden's administration
is expected to update its October rules, in part to align with
the broader Japanese tool list.
It could also go further than the Netherlands in limiting
what Dutch lithography manufacturer ASML ASML.AS can supply to
certain Chinese plants, Reuters exclusively reported last month.
The U.S. can regulate ASML directly as its equipment includes
U.S. parts. At the time, sources expected the updates in July,
but that now appears unlikely.
"Part of the reason it's taking so long is that the U.S. is
still talking to Japan. They need to make sure that if they
block anything, that they similarly block it in Japan," said a
source familiar with the discussion.
Tokyo remains worried that targeting China will provoke
damaging retaliation, such as a ban on Japanese electric cars, a
third Japanese industry official said.
"What advantage is there to making someone lose face, unless
that is your objective."
(Reporting by Tim Kelly Karen Freifeld, Kentaro Sugiyama;
additional reporting by Toby Sterling and Yoshifumi Takemoto;
Editing by Lincoln Feast)
((tim.kelly@thomsonreuters.com; +813-6441-1311;))