In the global semiconductor conflict, key U.S. lawmakers have urged Japan to implement tighter restrictions on the sale of chipmaking equipment to China. The lawmakers warned that if Tokyo does not take action, Washington could impose its own sanctions on Japanese companies or bar firms that continue to sell to China from receiving U.S. semiconductor subsidies.
The bipartisan call was outlined in a letter dated October 15, addressed to Japanese Ambassador to the U.S., Shigeo Yamada, and reviewed by Bloomberg. The letter underscores the mounting pressure on U.S. allies, particularly Japan and the Netherlands, to cooperate in curbing China’s technological advancements, particularly in the realm of semiconductor manufacturing.
The letter was penned by two key figures in U.S. Congress: Republican John Moolenaar, chairman of the House China Select Committee, and the committee’s top Democrat, Raja Krishnamoorthi. Their message stresses that cooperation between the U.S., Japan, and the Netherlands—home to the world’s top five semiconductor toolmakers—is essential in slowing China’s rapid advancement in chip technology.
Moolenaar and Krishnamoorthi rejected arguments that current export restrictions have materially harmed companies like Japan’s Tokyo Electron Ltd., a major producer of semiconductor equipment. They cited increases in the stock prices of Tokyo Electron, ASML Holding NV (a Dutch firm), and U.S. companies like Lam Research Corp. and Applied Materials Inc., as evidence that these firms continue to thrive despite the restrictions.
The letter also highlighted the role of the U.S. Chips and Science Act and the European Union’s semiconductor subsidy programs in supporting chipmaking industries. While these companies have benefited from the boom in artificial intelligence (AI) demand, none of them have yet received direct government grants from the U.S. under the Chips Act. However, their customers, including major chip manufacturers like Intel Corp. and Samsung Electronics Co., are eligible for 25% tax credits on purchases of semiconductor equipment for U.S.-based facilities.
Although China remains a lucrative market for all major chipmaking equipment companies, U.S. lawmakers are growing increasingly concerned about China’s technological ambitions. The Biden administration has led a yearslong campaign to prevent Beijing from gaining access to advanced AI technology, which it fears could enhance China’s military capabilities.
The administration has pressed Tokyo and The Hague to implement stricter controls on chipmaking exports to China, including banning Japanese and Dutch nationals from maintaining or repairing advanced equipment in China. This would align with similar U.S. regulations already in place for its citizens. Washington is also pushing its allies to block the sale of additional tools needed to manufacture less-advanced processors, an area China has turned its focus to after being cut off from the highest-end technology.
Despite the pressure, both Japan and the Netherlands have been reluctant to impose additional restrictions. Japanese officials, in particular, are concerned about possible economic retaliation from China, which is a crucial trading partner. China has warned Japan that further restrictions could lead to countermeasures, such as limiting Japanese automakers’ access to critical minerals. This poses a significant risk to companies like Toyota Motor Corp., which relies on Chinese raw materials for its production.
For Japan and the Netherlands, the semiconductor industry represents a critical intersection of economic interests and national security. The production of semiconductors is not only essential for the global economy but is also a key component of military and defense technologies. As the letter from U.S. lawmakers emphasized, without sufficient cooperation from its allies, China could gain a significant technological advantage.
“Chips at the level that China is seeking to dominate are the lifeblood of a modern economy and a modern military,” Moolenaar and Krishnamoorthi wrote. They stressed that failure to act could give China a “functional veto” over the ability of the U.S. and its allies to produce the weapons systems and consumer goods essential for their national security and economic growth.
The lawmakers also pointed out that while they prefer a multilateral solution, the U.S. has alternative measures at its disposal if Japan and the Netherlands fail to strengthen restrictions. One such tool is the Foreign Direct Product Rule (FDPR), which allows the U.S. to regulate goods made abroad that contain even a small amount of American technology. The Biden administration has previously discussed applying the FDPR to Japanese and Dutch companies but has so far opted not to include them in its latest round of export controls.
Concerns Over Unilateral Actions and Global Competition
One of the major concerns expressed by U.S. chipmakers is that tighter restrictions on American companies could give their foreign competitors, particularly in Japan and the Netherlands, an unfair advantage. U.S. companies argue that if Washington imposes unilateral controls without similar actions from its allies, it could harm the U.S. semiconductor industry without effectively curbing China’s technological ambitions.
China remains one of the largest markets for semiconductor equipment, and cutting off access to this market could have significant financial implications for firms like Tokyo Electron, ASML, and others. However, U.S. lawmakers have dismissed these concerns, pointing to the resilience of the industry despite existing restrictions and the growing demand for chips driven by AI and other emerging technologies.
In their letter, Moolenaar and Krishnamoorthi also highlighted the potential for the U.S. government to use the Chips and Science Act to further restrict companies that do business with China. The act, which was signed into law by President Joe Biden in 2022, provides substantial subsidies for chip production in the U.S., including funding for research and development and tax incentives for companies building semiconductor manufacturing facilities on American soil.
While the act has been primarily focused on boosting U.S. chip production and reducing reliance on foreign suppliers, lawmakers have discussed adding provisions that would penalize companies that sell advanced semiconductor equipment to China. One such proposal, introduced earlier this year, would bar recipients of Chips Act funding from purchasing Chinese-made equipment for U.S. facilities.
The ongoing semiconductor conflict is part of a broader geopolitical struggle between the U.S. and China. As both nations vie for technological supremacy, semiconductors have emerged as one of the most critical battlegrounds. Chips are essential for a wide range of industries, from consumer electronics and automobiles to military hardware and AI-driven technologies.
The U.S. has sought to limit China’s access to cutting-edge semiconductor technology, arguing that it poses a national security risk. In addition to the restrictions on chipmaking equipment, the Biden administration has also imposed sweeping export controls on AI chips and other advanced technologies, in an effort to prevent China from gaining an edge in the race to develop next-generation AI and military applications.
China, for its part, has invested heavily in its domestic semiconductor industry in an attempt to reduce its reliance on foreign suppliers. Beijing has also sought to retaliate against U.S. and allied efforts to restrict its access to critical technologies, raising concerns about the potential for a broader trade conflict that could disrupt global supply chains.
