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China has warned of tough economic retaliation against Japan if it continues to impose restrictions on its sales and maintenance of chipmaking equipment to Chinese companies, Bloomberg News reported.
Senior Chinese officials have reiterated this position in recent meetings with their Japanese counterparts, the report said. Added Quoted from people with knowledge of the subject.
Toyota Motor Corp. (TM) (OTCPK:TOYOF) has privately told officials in Japan that China may respond to new curbs on semiconductors by limiting Tokyo’s access to vital minerals needed for auto production, the report said.
Toyota is one of Japan’s most important companies and is involved in the country’s chip policy, partly due to the fact that it has invested in a new chip facility that Taiwan Semiconductor Manufacturing (TSM) is building in Kumamoto, according to the report.
The company’s concerns make the issue a key consideration for Japanese officials, along with those of Tokyo Electron, a semiconductor equipment maker, which would be most affected by any new Japanese export controls, the report said.
The United States and its allies, including the Netherlands, Germany, South Korea and Japan, have tightened restrictions on the Asian country’s access to advanced semiconductor technology. In July 2023, Japan restricted exports of 23 types of equipment, from machines that deposit films on silicon wafers to systems that make microscopic circuits.
In June, the United States urged its allies to limit China’s access to more chipmaking tools.
Some in Japan have been reluctant to accept the idea that the government will follow the latest U.S. geopolitical strategy. However, the U.S. government is confident it can allay Tokyo’s concerns and reach an agreement with Japan by the end of this year, the report noted.
But behind the scenes, the United States has been wielding its power under the Foreign Direct Product Act, or FDPR. This rule allows the United States to control the sales of products made anywhere in the world if they use American technology.
In ongoing discussions, US officials have ruled out using such force against Japan and other key allies, who view the base as a draconian move. However, a senior administration official indicated that Washington wants a diplomatic solution but does not rule out the use of military force, the report added.
Last week, it was reported that Netherlands-based chip equipment maker ASML (ASML) was likely to see further restrictions on its operations in China as the Dutch government was considering not renewing vital licenses.
In July, the U.S. government was considering imposing the toughest trade restrictions available if companies including ASML continued to give China access to advanced semiconductor technology. The U.S. has targeted ASML because it has a monopoly on manufacturing some of the machinery that produces the most advanced semiconductors. The Biden administration has stepped up efforts to limit China’s access to advanced semiconductor equipment, which is used in, among other things, the manufacture of artificial intelligence products.
The United States also discussed in July whether to further restrict China’s access to memory chips used in artificial intelligence and the tools needed to make those processors. South Korean companies Samsung (OTCPK:SSNLF) and SK Hynix are major suppliers of high-bandwidth memory (HBM) chips in the world. U.S. company Micron Technology (MU) is another major supplier.
Chinese tech companies, including Baidu, Huawei Technologies, and startups, have reportedly been stockpiling Samsung’s HBM chips in anticipation of new US restrictions on semiconductor exports to China,
In October 2023, the US introduced updates to export restrictions that would further limit the sale of chips made by companies like Nvidia to the US market.