Final nail in the coffin for China: US, Netherlands and Japan enter into agreement for chip sanctions

The US, Netherlands and Japan have finally entered into an agreement to impose sanctions on the Chinese chip making industry, and stop exporting chip making machines and tech to China. The EU is also the US to work on ways to reduce the reliance on Asia.

After months of back and forth and countless negotiations, the United States of America has finally secured an agreement with the Netherlands and Japan that would allow the three of them to restrict exports of silicon chips and chip-making tech and machinery to China. 

Furthermore, the trio will also be able to impose sanctions on other countries, if they are found to be supplying the Chinese with modern chip-making tech.

Representatives from all three companies met in Washington on Friday and finalised the details of the agreement. 

The agreement would extend certain export limits the US implemented on China back in October to businesses headquartered in the two ally nations, including ASML Holding, Nikon Corp., and Tokyo Electron, with the goal of undermining Beijing’s desire to develop its own domestic semiconductor capabilities. 

The main concern that both, certain members of the EU and the US had was that if China went on to make current and the next generation of silicon chips, they would use them in military applications, something that the US and its allies simply couldn’t afford to face.

There is no plan for a public announcement of the restrictions, and actual implementation could take months as the two countries finalise legal arrangements, people familiar with the matter said. “Discussions have been going on for a while, but we don’t talk about this. In answer to a query on the meetings earlier on Friday in The Hague, Dutch Prime Minister Mark Rutte said: “And if something would come out of this, it is dubious if this will be made extremely prominent.”

The Netherlands will ban ASML from exporting some or all of its immersion lithography equipment, the most sophisticated piece of equipment in its deep ultraviolet lithography line, to China. For the production of the latest, cutting-edge silicon chips, the machinery and the technology are essential. Japan, will be placing similar restrictions on Nikon and other lithography equipment makers.

Thierry Breton, the internal market commissioner for the EU, stated at the Centre for Strategic and International Studies, “We totally agree with the aim of denying China the most cutting-edge chips.” While addressing the US, Bretton added, “You will always find Europe by your side when it comes to ensuring our common security in technology,” Breton added, warning that any action should be “limited to what is necessary from a security point of view.”

Despite “differences,” Breton encouraged closer collaboration between the EU and the US, on rare earth elements to “lower collective reliance on Asia” by pointing to the transatlantic partnership’s achievements in the 5G telecommunications and semiconductor industries.

US President Joe Biden Biden signed the Chips and Science Act into law in August last year, to support American semiconductor research, development, and production through government subsidies and to remove China from chip supply chains while giving local manufacturing priority. Later this year, the EU is will be approving the EU Chips Act, which will have similar provisions as the Chips and Science Act. The law aims to increase Europe’s share of the world’s chip production capacity to about 20 per cent.

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