What just happened? The Netherlands and Japan have reached an agreement with the US to impose restrictions on the export of chip manufacturing tools to China. The move marks the end of two years of negotiations as the Biden administration tried to convince the countries to introduce US-style export controls on chipmaking equipment.
Reports last month suggested that the Netherlands and Japan were close to implementing bans on the export of advanced chipmaking devices to China following talks with Washington. While the sensitive nature of the deal means it hasn't been publicly announced, several people familiar with the matter say an agreement was reached on Friday.
Part of the reason the talks took so long to conclude was fear over how a ban would impact the nations' chip giants: ASML in the Netherlands and Tokyo Electron and Nikon in Japan.
ASML, the world's largest supplier of lithography machines used in the chipmaking process, was already prohibited from selling its most advanced extreme ultraviolet (EUV) lithography equipment, which costs about $164 million per unit, to its Chinese customers as it cannot obtain an export license from the Dutch government due to pressure from the United States. ASML is now prohibited from selling at least some of its older deep ultraviolet (DUV) lithography tools to Chinese clients, too.
The US has tightened its control over chip-related exports to China during the last 12 months. There were sweeping restrictions introduced in October that meant KLA Corp, Lam Research Corp, and Applied Materials Inc. could no longer export equipment required to make semiconductor components with sub-14 nanometer processes to the Asian nation. This led to concerns from the US companies that ASML would jump into the Chinese market space they had left.
The New York Times writes that Japan and the Netherlands will still likely require some time to make changes to their laws and regulations to put the new restrictions in place.
The US has long said its restrictions will prevent China from developing semiconductors for use in military applications, including supercomputers, nuclear weapons modeling, and hypersonic weapons. The export rules are also impacting the country's Made in China 2025 plan for updating its domestic manufacturing capabilities and lessening reliance on foreign chipmakers.