US and Japan Closing in on Deal to Limit Chip Tech Exports to China
According to the Financial Times, US and Japanese officials are reportedly close to finalizing a deal aimed at curbing tech exports to China's chip industry. This news emerges two weeks after Beijing warned of severe economic retaliation against Tokyo for proceeding with new chip export curbs.
Details of the Potential Deal
Sources familiar with the matter informed the Financial Times that US and Japanese officials are close to a 'breakthrough' in discussions to coordinate new export controls against China's chip industry. The proposed curbs would target non-US companies, requiring them to secure licenses to sell products directly to Chinese firms that have direct or indirect ties to the nation's chip industry.
The proposed trade restrictions aim to close loopholes in existing rules and introduce additional restrictions. This comes as Chinese firms like Huawei have successfully circumvented Western chip trade restrictions in recent years.
Objectives of the Trade Restrictions
One of the main goals of the US is to make it significantly more difficult for Chinese firms to acquire critical chipmaking tools, such as those from ASML in the Netherlands and Tokyo Electron in Japan.
The US is also pushing for restrictions on servicing, including software updates, and maintenance of these tools, which would significantly impact China. These controls would mirror those already imposed on US companies and citizens.
The negotiations have focused on aligning the three countries' export control rules so that Japanese and Dutch companies will not be subject to the FDPR, a move described by a Dutch source as a "diplomatic bomb."
Potential Economic Retaliation
One major concern is the potential for Beijing to unleash severe economic retaliation against Tokyo. This comes as the Biden administration continues to pressurize its allies.
In a separate report by Bloomberg, Toyota Motor warned Tokyo officials that new chip export curbs could be disastrous, as they would cut off access to critical minerals from the world's second-largest economy.
The question now is whether Tokyo should align with the Biden administration's campaign against China's tech industry.
"Japan shouldn't tighten its export control just because the US is making such a request," said Akira Minamikawa, an analyst with research firm Omdia. He added, "Japan should have its own philosophy, decide what's best for the country and stand firm."
Future Plans
The Financial Times reported that President Biden plans to announce the new export controls before the presidential election in November.
Despite Western sanctions, China's high-tech advancements, such as domestic 5G smartphones and AI chips, show that Beijing's rise to become a global superpower remains unimpeded.
Bottom Line
The potential agreement between the US and Japan to restrict chip tech exports to China is a significant development. It underscores the ongoing tension between Western powers and China's burgeoning tech industry. What are your thoughts on this issue? Do you believe such restrictions are necessary, or could they lead to further economic retaliation? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
