1674897623 Netherlands Japan Join US in Limiting Chip Exports to China

Netherlands, Japan Join US in Limiting Chip Exports to China

Japan and the Netherlands will limit exports of chipmaking tools to China after reaching a deal with the US intended to make it harder for the Chinese military to develop advanced weapons.

Several people familiar with the trilateral deal said the countries reached an agreement on Friday after a latest round of high-level talks at the White House. The deal comes three months after Washington imposed unilateral export controls that prevented US companies from selling advanced chip-making equipment to Chinese corporations.

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

Joe Biden’s government has been negotiating with countries for two years but has met resistance over concerns about the impact on their chipmaking toolmakers, notably ASML in the Netherlands and Tokyo Electron and Nikon in Japan.

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

The US chipmaking toolmakers that dominate the sector — Applied Materials, Lam Research and KLA — were concerned the October move imposed restrictions on them, but not ASML and Tokyo Electron. At the time, Alan Estevez, the Commerce Department’s top export controls official, justified the move by saying it would prove to allies that the US had “light in the game” and was ready to make tough decisions.

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

Several people said the three countries decided not to release the details due to the sensitive nature of the discussions. Washington wanted to give Japan and the Netherlands space to decide how to communicate the restrictions. It remains unclear with which mechanisms the countries will impose the restrictions on their cutting tool manufacturers.

Tokyo and The Hague are also concerned at being seen to have aligned themselves with American policies specifically targeting China.

Dutch Prime Minister Mark Rutte said this week that while public attention on cutting tool exports has focused on Japan, the Netherlands, the US and China, the discussion is “further than that”.

Netherlands Japan Join US in Limiting Chip Exports to China

The mounting pressure on allies in recent months came after US National Security Adviser Jake Sullivan signaled a significant change of course in September. In a speech, he said the US should abandon its “sliding scale” approach and try to stay two generations ahead of chips and instead “keep as big a lead as possible.”

Rutte told the Financial Times in an interview that the Netherlands was “on par” with those who argued that high-end western chips should not be used in some countries’ weapons. He said western nations and Asian partners need to maintain the “head start” in chips.

He added that the debate is broader than just one Dutch company. Rutte said he was “absolutely convinced” that it was possible “to come to a solution with the many partners we are talking to”, adding that “The Hague is coordinating with everyone”.

In a statement, ASML said it understands “steps have been taken toward an agreement between governments that we understand will focus on advanced chip manufacturing technology, including but not limited to advanced lithography tools.” Before it comes into force, it needs to be detailed and enacted into legislation, which will take time.”

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

Bloomberg first reported on the deal.

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