The Chip War: In a major blow to China, Netherlands and Japan decide to side with US over chip sanctions

Much to China’s dismay, the Netherlands and Japan have decided to abide by the sanctions that the US has imposed on Chinese chip makers. This effectively means that China will no longer be able to make the latest semiconductors, and can neither develop next-gen chips.

It seems that after a lengthy discussion, the government bodies of the Netherlands and Japan that control exports may finally agree with the Biden administration and impose proper sanctions on Chinese chip-making companies and stop licensing the tech and stop selling them machinery along with other components that is needed to manufacture silicon processors.

The Biden administration is leading a campaign to limit technology exports to China and impede its foray into the chip business. Important suppliers of semiconductor manufacturing equipment from the Netherlands and Japan are on the verge of joining the effort. 

The Netherlands agreeing to abide by the sanctions, is a matter of grave concern for China, as the Netherlands is home to ASML Holdings, the only semiconductor company which makes the lithography machinery that is used to make the latest generation of semiconductors.

People who are close to the situation told Bloomberg that an agreement and finalisation of the Dutch and Japanese export limits might take place as early as the end of January.

Fumio Kishida, the prime minister of Japan, and Mark Rutte, the prime minister of the Netherlands, spoke with US President Joe Biden about their intentions earlier this month at the White House.

The Hague and Tokyo probably won’t go as far as Washington’s prohibitions, which prevent US nationals from collaborating with Chinese chip manufacturers in addition to restricting exports of gear built in the US. 

However, once all three nations take action, Beijing may find itself even more blocked off from the knowledge or technology required to produce the most cutting-edge semiconductors.

While the Netherlands houses ASML Holdings, Japan’s Tokyo Electron Ltd is another major player in lithography and in making machinery that is used to print circuitry on the silicon wafers.

It would be nearly impossible for Chinese chip makers to produce the current generation of processors without access to the cutting-edge products and tech provided by ASML, Tokyo Electron, and other US companies like Applied Materials Inc., Lam Research Corp., and KLA Corp. This effectively kills their ability to design and develop the next generation of processors as well.

China, obviously, has been left fuming over this latest development. As per a South China Morning Post report, China’s Foreign Ministry spokesman Wang Wenbin said on Friday at a regular press briefing in Beijing that the US effort showed its “selfish hegemonic interest” and that Washington was “seeking to benefit itself at the expense of its allies.” China “would follow what is developing and defend our own interests,” Wang added.

China is the single largest market for semiconductors and silicon chips whereas the US is where the technology originated and where most of the engineering and research and development take place. The Chinese tech industry’s dependency on imported silicon chip has led China to try and lessen its reliance on imports.

As for Tokyo Electron and ASML, both of these companies too, seem annoyed by the decisions taken by their respective governments. Tokyo Electron has said the general clampdown on its Chinese customers is already hurting business, whereas ASML has put out a statement saying that demand elsewhere in the world for its most advanced products can make up for any revenue shortfall from China. 

However, ASML’s CEO Peter Wennink has also said that his company has “given up enough” with the pre-existing restrictions on the sales of its extreme ultraviolet lithography machines.

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