Japanese semiconductor equipment firms are increasingly dependent on China as a major source of revenue, even as they navigate the complex geopolitical landscape shaped by U.S. export controls. This reliance highlights the delicate balance Japan must maintain between adhering to U.S. demands and protecting its own economic interests.
Balancing Geopolitical Pressures and Economic Interests
Japanese chip equipment manufacturers have found a significant market in China, where their products are used primarily for legacy chips. These chips are crucial for applications such as automotive technology rather than cutting-edge artificial intelligence models. The focus on legacy chips underscores the critical role that Japanese firms play in China’s semiconductor supply chain.
Despite the importance of the Chinese market, Japanese companies are caught in the crossfire of the U.S.-China trade conflict. The Biden administration’s recent restrictions on high-end semiconductor technology have intensified the pressure on allied countries, including Japan, to limit their exports to China.
China’s Response and Potential Retaliation
China has reacted strongly to export controls imposed by Japan and other allies. Bloomberg reported earlier this week that Beijing has threatened retaliatory measures if Japan expands its restrictions on chip equipment sales. However, Chinese officials have denied these claims, asserting that their own export control measures are fair and aimed at maintaining global industrial stability.
China’s Ministry of Commerce previously criticized Japan’s export controls as an “abuse of export control” and a “serious violation of WTO duties.” This tension reflects broader concerns about the impact of such measures on the global supply chain and market dynamics.
China’s Efforts to Secure Semiconductor Equipment
In response to international restrictions, China has increased its efforts to secure chip-making equipment. Since the second quarter of 2023, Chinese purchases of semiconductor equipment have surged. According to a report from the industry body SEMI, China acquired approximately $25 billion worth of chip equipment in the first half of 2024. This figure surpasses the combined total of purchases made by the U.S., South Korea, Taiwan, and Japan.
Despite these advancements, China continues to face challenges in accessing the most advanced semiconductor manufacturing technologies. Notably, Dutch firm ASML, a key supplier of high-end chip-making equipment, has been barred from exporting to China, limiting the country’s ability to produce cutting-edge chips.
Future Outlook
As geopolitical tensions continue to influence the semiconductor industry, Japanese chip equipment firms are expected to navigate a complex landscape of international regulations and economic pressures. While Japan aims to balance its economic interests with the demands of its allies, China’s growing investment in semiconductor technology suggests it is positioning itself to become more self-sufficient in the future.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna Sahu holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.
