In a recent development, heavyweight lawmakers in the United States are urging Japan to strengthen restrictions on the sale of chip manufacturing equipment to China. They have issued a warning that if Japan does not take action promptly, Washington may increase restrictions on Japanese companies or tighten subsidy rules. This would mean that if companies sell advanced chip equipment to China, they would no longer be eligible for semiconductor subsidies from the United States.
The House Select Committee on the Chinese Communist Party, chaired by Republican John Moolenaar and leading Democrat Raja Krishnamoorthi, sent a letter to the Japanese Ambassador to the United States, Shigetoo Yamada, outlining their concerns. The letter, dated October 15th, highlighted the urgency of addressing the flow of semiconductor manufacturing equipment from Japan to China.
According to the lawmakers, the transfer of semiconductor manufacturing equipment from Japan, the United States, and the Netherlands to China has significantly increased global reliance on Chinese manufacturing capabilities, enabling them to produce advanced semiconductors. This export of chip equipment to China poses a long-term national security risk, not only to the U.S. but also to Japan and the Netherlands.
Moolenaar and Krishnamoorthi emphasized in their letter that China is actively leveraging semiconductor production equipment from the U.S., Japan, and the Netherlands to establish the world’s largest semiconductor manufacturing base. It is estimated that within the next decade, China could control around 50% of the global 50-180 nanometer foundry capacity.
The lawmakers warned that traditional chips dominated by the CCP continue to be crucial for modern economies and military capabilities. Failure to address these issues through multilateral efforts could allow China to hinder the production of essential weapons and consumer goods.
Furthermore, Washington is concerned that if China gains the ability to manufacture advanced semiconductors, it could accelerate military intelligence capabilities, significantly increasing the military threat posed by China.
The lawmakers noted that negotiations on multilateral export controls are facing delays due to concerns from companies that strengthening controls could impact their operations. However, they pointed out that over the past five years, the stock prices of major chip equipment manufacturers such as Applied Materials, Lam Research, ASML, and Tokyo Electron have risen significantly.
To curb China’s technological ambitions, the cooperation between the U.S., Japan, and the Netherlands is deemed critical. The U.S. is advocating for Tokyo and Amsterdam to follow Washington’s lead and prohibit Japanese and Dutch personnel from servicing advanced chip equipment in China.
Prior to the upcoming U.S. elections, Japan and the Netherlands are reluctant to implement new regulations. Japan is concerned that China may retaliate by restricting the sale of crucial minerals to Japanese automakers, affecting the Japanese automotive industry. In meetings between Beijing and Tokyo officials in September, Chinese officials repeatedly threatened retaliatory actions.
The lawmakers reiterated that while multilateral action remains the best approach to counter the threat posed by China, the U.S. also has other options. One option is to invoke the Foreign Direct Product Rule to ensure that any precision chip equipment produced using U.S. technology in Japan or elsewhere must obtain an export license from the U.S. before being exported to China.
Additionally, there is a possibility that the U.S. may introduce additional protective measures under the CHIPS and Science Act, excluding companies or countries that export cutting-edge chip manufacturing equipment to China from funding provisions in the legislation.