Japan, Netherlands Join US in Restricting Advanced Semiconductor Manufacturing Equipment

China will soon lose two other sources of equipment to make advanced semiconductors.

Japan and the Netherlands have recently announced they will join the US in limiting China's access to advanced semiconductor machinery to hinder the country's ambitions of building its own domestic chip capabilities, per Bloomberg's sources.

The US is urging countries around the world over to join in its limiting of China's semiconductor-producing capabilities due to national security concerns, per the Peterson Institute for International Economics.

Japan, Netherlands Semiconductor Machinery Ban Details

Bloomberg's anonymous sources mentioned that Japan and the Netherlands are set to conclude talks with the US as soon as Friday US time regarding a new set of limits to what can be supplied to Chinese companies.

Bloomberg's sources asked not to be named due to the private nature of these talks.

For instance, Japan would impose restrictions on Nikon Corp. to prevent them from selling machinery and equipment required to build advanced semiconductors, per Reuters. Deputy Chief Cabinet Secretary Seiji Kihara, a government spokesperson, said that Japan would take "appropriate steps" based on the US' and other nations' regulatory moves, but declined to comment further when asked about the report at a Friday afternoon media briefing.

Although this restriction could affect Nikon, the Japanese company that would be affected the most is Tokyo electron, which relies on China for around 25% of its sales. As a result, Meisei University professor Masahiko Hosokawa called for fairness so that any company restricting China's access to equipment would be "disproportionately disadvantaged."

Meanwhile, the Netherlands would do the same with the expansion of ASML Holding NV's restrictions, further regulating what the company can sell to China. These new restrictions include its so-called deep ultraviolet lithography machines, which are critical in making certain advanced chips and without which attempts to create a production line would be impossible.

Although the Dutch foreign ministry declined to comment on the proceedings, Dutch Prime Minister Mark Rutte said he expects to reach an agreement with the US and other allies on stricter controls.

However, Rutte mentioned that the Netherlands will not simply adopt US rules and would take questions at his weekly news briefing on Jan. 27.

Japan and the Netherlands' addition to the list of countries already placing restrictions on China is a boon for the Biden administration, which sought to curtail China's ability to create its own advanced semiconductors. the restrictions also involve China's purchasing and acquiring cutting-edge chips from abroad that would aid its military and artificial intelligence capabilities.

Are The Restrictions Working?

For the most part, the restrictions on China are indeed having their intended effect. The South China Morning Post reports that China's Shanghai-based Semiconductor Manufacturing International Corp. saw its shares decline by as much as 2.1%, while Hua Hong Semocinductor's shares went down by 1.5%

Fiona Lim, a foreign-exchange strategist at Malayan Banking Berhard in Singapore, stated that the new restrictions set the next escalating move in the US-China tech war "a bit more meaningfully and could weaken yuan sentiment a tad in the near term."

However, this slump could soon reverse should Chinese companies learn how to develop the advanced semiconductors they need without the machines currently restricted to them, per ASML president and CEO Peter Wennick. he admitted that while it will take time for China's semiconductor companies to figure how to create the advanced semiconductors themselves, they will eventually get there.