Japan's chip restrictions will only hurt itself

China top export destination for semiconductor equipment firms of island country

Japan will impede the development of its own chip industry by aligning trade rules with the United States' strategy of curbing China's ability to make advanced semiconductors, experts said.

Pointing out that being Washington's pawn will only harm Tokyo, they said Japan's export controls on 23 types of crucial chipmaking equipment, beginning in July, will motivate Chinese companies to invest greater resources for breakthroughs in critical technologies.

They said the curbs are needlessly broad and the scope of control far exceeds the internationally accepted list of restricted items. This will weigh heavily on Japanese companies, they said.

The move will undermine the normal economic and trade order, and cause shocks to industrial development, said Zhang Wei, vice-president of the Chinese Academy of International Trade and Economic Cooperation.

The restricted equipment includes essential tools for producing semiconductor chips, such as lithography machines, chemical vapor deposition equipment and etching machines, she said. Due to the wide application of semiconductor chips, these restrictive measures will have a profound impact on the development of the semiconductor industry in China and Japan, she added.

"Cooperation on semiconductors is one of the most representative examples of mutual benefits from Sino-Japanese economic and trade ties," Zhang said.

The Chinese mainland is the largest export destination for Japanese semiconductor equipment manufacturers, with such exports reaching 820 billion yen ($5.7 billion) last year, exceeding 30 percent of Japan's total chipmaking equipment exports, and almost double the value of US exports in the same sector to China, data from the Chinese Academy of International Trade and Economic Cooperation showed.

"The Chinese mainland market accounts for about 20 to 30 percent of the overall sales revenue of Japanese chip equipment makers. The restrictions will cause huge losses for them," Zhang said.

Takamoto Suzuki, who heads economic research at Japanese trading and investment conglomerate Marubeni, said Japanese chipmakers depend heavily on exports as the domestic chip market is not robust.

"This situation could impede the progress of the Japanese industry and ultimately diminish its competitiveness," Suzuki said.