US Chip Crackdown Faces Growing Resistance from Allies
The US is set to implementnew restrictions on the export of chip manufacturing equipment to China, but its allies areincreasingly reluctant to follow suit, raising questions about the effectiveness of the Biden administration’s strategy.
The new rules, expected to be announced in August,aim to prevent foreign companies from supplying chipmaking equipment to six of China’s most advanced chip manufacturers. The restrictions will target companies in Israel, Taiwan, Singapore, and Malaysia, but notably exclude firms in Japan, the Netherlands, and South Korea.
While these countries are not directly targeted by the new regulations, the US has been pressuring them to tighten their own export controls on China.However, both Japan and the Netherlands have resisted these calls, citing concerns about the potential economic impact on their companies and the broader global semiconductor industry.
The US has threatened to use its foreign direct product rule to pressure Tokyo Electronand ASML, two key suppliers of chipmaking equipment, to restrict their sales to China. This rule allows the US to control the export of products that contain US technology or components, even if they are manufactured outside the US.
The threat appears to have had some effect. The Dutch government is reportedly considering notrenewing certain licenses for ASML to provide equipment maintenance services in China, which could disrupt operations at Chinese chip factories as early as next year. However, Dutch Prime Minister Mark Rutte has also emphasized that the government will consider the economic interests of ASML, which currently generates 49% of its sales from China.
Japan, meanwhile, is facing a complex situation. With a new prime minister set to take office in September, the current government is unlikely to tighten export controls on Tokyo Electron before the end of its term. However, the new administration, likely to be led by a member of the ruling Liberal Democratic Party, maybe more receptive to US pressure.
China has warned Japan of severe economic measures if it further restricts exports of high-performance semiconductor manufacturing equipment. This threat has raised concerns among Japanese officials, particularly in light of China’s importance as a source of critical minerals for Japanese automakers like Toyota.
South Korea is also facing pressure from the US to join the chip crackdown. However, the country is hesitant due to its deep economic ties with China and concerns about potential retaliation. South Korea’s economy is heavily reliant on exports to China, and the country’s semiconductor industry is particularly vulnerable to any disruptions in the Chinesemarket.
The Biden administration is confident that it can overcome these challenges and secure the cooperation of its allies. However, the growing resistance from key players like Japan, the Netherlands, and South Korea raises serious questions about the long-term viability of the US strategy.
The success of the US chip crackdown ultimatelydepends on its ability to balance its national security interests with the economic interests of its allies. If the US fails to address these concerns, it risks alienating key partners and undermining the effectiveness of its efforts to contain China’s technological advancement.
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