Netherlands and Japan join US in restricting chip exports to China

Japan and the Netherlands will restrict exports of chip manufacturing equipment to China after reaching a deal with the US designed to make it harder for China’s military to develop advanced weapons.

Several people familiar with the tripartite agreement said the countries reached an agreement on Friday after a final round of high-level talks at the White House. The agreement comes three months after Washington imposed unilateral export controls that bar American companies from selling advanced chipmaking equipment to Chinese groups.

The White House declined to comment. But the deal marks a significant milestone in US efforts to work with allies to hinder Chinese efforts to develop its semiconductor industry.

Joe Biden’s administration has been negotiating with the countries for two years but faced resistance as they worried about the impact on their chipmaking tool companies, particularly ASML in the Netherlands and Tokyo Electron and Nikon in Japan.

In October, the US announced sweeping unilateral export controls that complicate Chinese efforts to obtain, or develop, advanced semiconductors for use in supercomputers and other military-related applications, such as artificial intelligence, nuclear weapon modeling and hypersonic weapons. were designed for.

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US chip manufacturing equipment groups that dominate the sector – Applied Materials, Lam Research and KLA – were concerned that the October move would impose sanctions on them but not ASML and Tokyo Electron. At the time, Alan Estevez, the top Commerce Department official for export controls, justified the move, saying it would prove to allies that the US had “skin in the game” and was willing to make tough decisions.

Estevez and Tarun Chhabra, the National Security Council official who is the driving force behind the move, stepped up efforts to persuade allies during visits to Tokyo and The Hague in recent months.

Many said the three countries had decided not to make the details public because of the sensitive nature of the discussions. Washington wanted to give space to Japan and the Netherlands to decide how to communicate the sanctions. It is not clear what mechanisms countries will use to impose restrictions on their chip tool companies.

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Tokyo and The Hague are also concerned about the signing of a US policy that specifically targets China.

Dutch Prime Minister Mark Rutte this week said public attention on chip equipment exports was focused on Japan, the Netherlands, the US and China, but the discussion was “broader than that”.

The pressure on the allies has increased in recent months after US National Security Adviser Jake Sullivan signaled a significant shift in policy in September. In a speech, he said that the US should abandon its “sliding scale” approach of trying to keep ahead of two generations of chips, and instead maintain “as big a lead as possible”.

Rutte told the Financial Times in an interview that the Netherlands “saw eye to eye” with those who argued that Western high-end chips should not be used in some countries’ weapons. He said Western countries and Asian partners had to maintain a “leading edge” on the chips.

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He said the debate was wider than just one Dutch company. Rutte said he was “absolutely convinced” that “it was possible to find a solution with the many partners we are discussing” and that “The Hague was coordinating with everyone”.

In a statement, ASML said it understood that “steps have been taken towards an agreement between the governments which, to our understanding, will focus on advanced chip manufacturing technology, including advanced lithography equipment, but it Before it can come into effect, it needs to be elaborately drawn up and enacted into law, which will take time.

ASML said that based on comments from government officials and its understanding of the timeline, “we do not expect these measures to have a material impact on the expectations we have published for 2023”.

Bloomberg first reported the deal.

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