As Japan aligns with U.S. chip curbs on China, some in Tokyo feel uneasy
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[July 24, 2023] By
Tim Kelly, Karen Freifeld and Kentaro Sugiyama
TOKYO/NEW YORK (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, said they expect Japan's controls to have a limited
business impact.
Chip tester company Advantest Corp said none of its products are
affected.
Lithography machine makers Nikon Corp and Canon Inc, and wafer cleaner
manufacturer Screen Holdings did not respond.
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Semiconductor chips are seen on a
circuit board of a computer in this illustration picture taken
February 25, 2022. REUTERS/Florence Lo/Illustration/File Photo/File
Photo
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 administrationis
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 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)
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