Japan’s chip export controls are a major concern for China’s self-sufficiency campaign, analysts say

It is little surprise that Beijing is urging Japan to end its planned export controls on semiconductor technology, with China’s chip sector set to come under huge pressure from Tokyo’s growing cooperation with the US on trade restrictions, analysts say.

Under Japanese measures slated for July, domestic companies will need a licence to sell 23 types of chip-manufacturing technology to a foreign country, including cleaning, deposition, lithography and etching equipment. This follows an agreement by the US, Japan and the Netherlands to limit the export of advanced chip-making equipment to China.

Brady Wang, a semiconductor analyst with market research firm Counterpoint Research, said Tokyo’s alignment with the US and the Netherlands will be particularly damaging as China seeks to source new semiconductor equipment that can be used to produce more advanced chips.

“China currently has the capability to produce chips at 14-nm, however, its capacity is very limited,” said Wang. “Given further exertions from the US and Japan, I don’t believe they will have the capability to increase their capacities in 20-nm and below [nodes].”

A nanometre is a common measurement used to classify semiconductor industry technology, with fewer nanometres generally meaning more advanced technology. South Korea’s Samsung Electronics and Taiwan Semiconductor Manufacturing Co announced the production of 3-nm chips in 2022.

Currently, the largest companies that sell equipment used to produce cutting-edge chips are in the US, the Netherlands and Japan, such as US-based Applied Materials, the Netherlands’ ASML and Japan’s Tokyo Electron. According to UN Comtrade data, Japan was the top exporter to China of semiconductor manufacturing equipment in 2022.