Shares of Japanese semiconductor-related companies soared on Thursday after reports emerged that the US government is considering milder-than-expected restrictions on exports of chip equipment and AI memory semiconductors to China. The announcement triggered a rally in Japan’s high-stakes chip manufacturing sector, with several companies posting significant gains.
Tokyo Electron Ltd., a major player in semiconductor equipment manufacturing, saw its stock jump as much as 10%, marking its steepest rise since August. Similarly, Kokusai Electric Corp. experienced a staggering surge of 23% at one point, reflecting investor confidence.
Other chipmakers also enjoyed the upbeat momentum. Towa Corp. rose 6.2%, while Screen Holdings Co. climbed 9.6%. The gains are linked to the companies’ exposure to Chinese markets, a critical revenue stream for Japan’s semiconductor sector.
Andrew Jackson, head of Japan equity research at Ortus Advisors, highlighted the significance of the US government’s reported decision. “The news is a positive for Japanese chip stocks — anything with relatively high China sales weightings,” he said.
The semiconductor industry has been at the center of a broader geopolitical struggle between the US and China. Over the past several years, the US has imposed restrictions to curb China’s technological advancements, citing national security concerns. These measures have included blacklisting Chinese firms like Huawei Technologies Co. and limiting access to advanced chipmaking tools.
The Biden administration’s recent decision represents a notable shift in tone. Reports indicate that fewer suppliers to Huawei will be blacklisted than previously anticipated, and ChangXin Memory Technologies Inc. (CXMT), a Chinese company working on cutting-edge AI memory chips, will not be added to the US Department of Commerce’s entity list.
Such developments signal a softer approach toward regulating China’s semiconductor sector. This more tempered stance could provide breathing room for international firms, particularly Japanese chip equipment manufacturers, which depend on Chinese customers for a significant portion of their business.
Japan’s semiconductor industry is intricately tied to China, a key consumer of chipmaking equipment and advanced semiconductor technologies. Tokyo Electron, for example, generates a substantial percentage of its revenue from Chinese buyers. The reported policy adjustments from the US have reignited investor optimism about maintaining these crucial business relationships.
Companies like Tokyo Electron and Kokusai Electric produce essential tools for fabricating semiconductors, ranging from lithography machines to etching and deposition systems. These tools are indispensable for manufacturing advanced chips used in everything from smartphones and AI systems to electric vehicles and defense technologies.
For these companies, access to Chinese markets is vital for sustaining growth and innovation. Restrictions from the US often ripple through the global supply chain, making Thursday’s news particularly welcome for stakeholders across the sector.
Industry experts view the easing of restrictions as a strategic move by the US to balance economic considerations with national security concerns.
“The semiconductor supply chain is global, and any restriction has far-reaching consequences,” said Makoto Tanabe, a Tokyo-based market analyst. “The US administration’s decision not to fully restrict AI memory semiconductors could signal a realization of the economic interdependence between these regions.”
At the same time, there is caution about the durability of this policy. “With a change of administration in the US looming in January, the boost to Japanese chipmakers could be short-lived,” Jackson warned, referencing the potential return of former President Donald Trump to office. “It will depend on how far the incoming administration follows the same, more dovish tone.”
One of the most intriguing aspects of the announcement is the US decision not to blacklist ChangXin Memory Technologies. CXMT has been developing AI memory chips, a crucial technology for powering machine learning and other advanced computing processes.
AI memory chips represent a strategic frontier in the semiconductor industry, with applications spanning data centers, cloud computing, autonomous vehicles, and military technology. By refraining from restricting CXMT, the US appears to be signaling a more pragmatic approach to the burgeoning AI industry.
For Japan, this decision has dual implications. On the one hand, it underscores the importance of Japanese companies in the global AI semiconductor supply chain. On the other, it heightens the competitive landscape as Chinese firms like CXMT continue advancing their technological capabilities.
The Biden administration’s approach highlights the complex interplay between economic diplomacy and national security. China has been investing heavily in its domestic semiconductor sector to reduce reliance on foreign suppliers, a goal supported by substantial state funding. Meanwhile, the US has been tightening controls over critical technologies to maintain a competitive edge.
The more lenient restrictions could reflect a calculated effort to ease tensions ahead of potential high-level negotiations. However, some analysts warn that this temporary reprieve may not signify a long-term detente.
“Semiconductors are the heart of the technological rivalry between the US and China,” said Sarah Lindquist, a senior analyst specializing in international trade policy. “This news is positive for Japanese firms in the short term, but the broader landscape remains highly unpredictable.”
Japan plays a pivotal role in the global semiconductor industry, particularly in the production of manufacturing equipment and materials. Companies like Tokyo Electron and Screen Holdings are integral to the supply chain, providing tools used by semiconductor giants such as Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung.
Additionally, Japan’s expertise in materials science — including the production of photomasks and photoresists used in chipmaking — cements its importance in the industry.
This interdependence underscores why Japanese companies are so sensitive to US-China trade dynamics. Any disruption in Chinese demand can have a significant impact on Japanese semiconductor players, while favorable policies often translate into rapid stock market gains.
While the rally in Japanese semiconductor stocks reflects optimism, uncertainties remain. Investors are closely monitoring both US policy developments and the evolving semiconductor strategies of China.
Market participants are also weighing the impact of domestic initiatives, such as Japan’s renewed focus on semiconductor self-sufficiency. The Japanese government has pledged billions of dollars in subsidies to bolster domestic production, including plans for a next-generation semiconductor plant in Kumamoto Prefecture.
In the near term, however, the trajectory of US-China relations will remain the defining factor. With the US presidential election on the horizon, the semiconductor industry faces a period of flux.
As one analyst summarized, “Today’s rally is a testament to how critical policy decisions are for the semiconductor sector. But the landscape is dynamic, and companies must remain agile to navigate future challenges.”
