US Imposes Stringent Export Restrictions on China’s Semiconductor Industry
On October 7, 2022, the US unveiled a sweeping set of export restrictions (the “10.7” regulations) against China, aimed at curbing the development of the nation’s supercomputers and AI semiconductors with potential military applications. Spanning over 160 pages, the regulations have far-reaching implications for the global semiconductor industry, international politics, and the world economy.
It took two months to grasp the full scope of the “10.7” regulations, which some analysts believe could devastate China’s semiconductor industry and even provoke a so-called “Taiwan emergency” – a forceful invasion of Taiwan by China in retaliation.
The US has also requested (or pressured) Japan and the Netherlands to cooperate with the “10.7” regulations. Both countries are reportedly complying with the US request. On March 31, 2023, Japan’s Ministry of Economy, Trade, and Industry (METI) announced 23 items, including semiconductor manufacturing equipment, subject to export controls and opened them for public comments until April 29. The revised ministerial ordinance, based on the feedback, is expected to come into effect as early as July 2023.
The list of 23 items subject to export control is difficult to decipher. This piece will classify these 23 items and discuss their implications. In summary, Japan’s 23 export controls appear “very confusing” and peculiar, and it is hoped that public comments will address these issues.
To recap, the “10.7” regulations target:
- A ban on exporting high-performance semiconductors used in China’s supercomputers and AI, including NVIDIA GPUs and AMD CPUs.
- A prohibition on exporting US-made manufacturing equipment and involving US personnel in China’s semiconductor industry to prevent cutting-edge development.
- A requirement for US government permission when exporting regulated semiconductor film deposition equipment, regardless of end-use or manufacturer.
- A ban on exporting US-made parts and materials to Chinese semiconductor manufacturing equipment manufacturers.
- Applicable restrictions on foreign semiconductor manufacturers operating in China (i.e., TSMC, Samsung Electronics, SK Hynix).
Furthermore, it is unclear why only Nikon’s ArF immersion systems are subject to export controls, while other ArF immersion systems from Canon and ASML are not regulated. This inconsistency in the regulations is also confusing.
- Dry etching, deposition, and ion implantation-related
A) Dry etching equipment for materials with a dielectric constant of 3.9 or higher
B) Equipment for atomic layer deposition (ALD) of hafnium-containing high-k gate dielectric materials
C) Equipment for chemical vapor deposition (CVD) of hafnium-containing high-k gate dielectric materials
D) Ion implantation equipment for doping with boron, phosphorus, arsenic, or antimony
A) and B) are related to high-k dielectric materials, which are used in the gate dielectric layer of logic semiconductors. C) is related to CVD equipment for high-k gate dielectric materials. While these items are indeed important in semiconductor manufacturing, it is unclear why they are specifically targeted for export controls, and it raises questions about the rationale behind these regulations. D) involves ion implantation equipment for doping with certain elements, which is a key process in semiconductor manufacturing. However, it is also unclear why only specific elements are targeted for export controls, leading to further confusion about the intent of these regulations.
- Other items.
The remaining items include equipment for manufacturing power semiconductor devices, compound semiconductor manufacturing equipment, and equipment for manufacturing semiconductor-related materials such as III-V group materials.
These items seem to be unrelated to the advanced semiconductor manufacturing that the United States aims to control with its “10.7” regulations. It is unclear why these items are included in Japan’s export control list, leading to further questions about the rationale and consistency of these regulations.
In conclusion, Japan’s 23 export control items are confusing and inconsistent, raising questions about the intent and effectiveness of these regulations. It is hoped that the public comment period will lead to revisions and clarifications to better align with the original goals of the “10.7” regulations in the United States.
While the cooperation between the United States, the Netherlands, and Japan aims to curb China’s development of advanced semiconductors and related technologies, the current export control items proposed by Japan appear to be misaligned with this goal.
Further revisions and clarifications are necessary to ensure a more effective and consistent approach to export controls in the global semiconductor industry.
The “10.7” regulations implemented by the United States, targeting advanced semiconductor manufacturers in China, have far-reaching implications for the global semiconductor industry. These regulations have the potential to stifle China’s progress in the advanced semiconductor space, making it difficult for Chinese manufacturers to expand or build new factories.
In addition, it brings challenges to global semiconductor manufacturing equipment suppliers, as they face restrictions on exporting their products to the targeted Chinese companies. The “10.7” regulations focus on various aspects of semiconductor manufacturing, such as deposition equipment and lithography equipment. The intention behind these regulations is to control China’s progress in the semiconductor industry by targeting the crucial upstream processes.
However, the regulations have caused confusion and inconsistencies in the industry, as some of the targeted equipment and processes might not even exist or have limited relevance to China’s current capabilities. The cooperation of the Netherlands and Japan in restricting exports of advanced semiconductor manufacturing equipment, such as EUV exposure equipment and coaters developers, further tightens the grip on China’s semiconductor industry.
However, the way these regulations are written and implemented has raised questions about their effectiveness, and whether they can be easily circumvented. In conclusion, the “10.7” regulations and the cooperation of the Netherlands and Japan in restricting advanced semiconductor manufacturing equipment exports have the potential to impact the Chinese semiconductor industry significantly.
However, the confusing and inconsistent nature of the regulations raises doubts about their effectiveness and whether they address the right equipment and processes. In order to avoid misunderstandings and to provide clarity for the industry, it would be helpful if the policymakers could review and clarify the regulations, ensuring they target the most relevant and impactful technologies.
Japan’s Ministry of Economy, Trade and Industry (METI) has introduced export control measures to comply with the US “10.7” regulations targeting the Chinese semiconductor industry. However, the 23 items of semiconductor manufacturing equipment listed by METI have raised concerns and confusion in the industry due to their inconsistency and ambiguity. Some of the main issues are:
- While EUV exports to China are prohibited, EUV-related devices and parts are subject to export restrictions across the board, raising questions about the effectiveness of such restrictions.
- The export control list contains ArF immersion lithography equipment but doesn’t include ArF immersion coaters/developers, creating a contradiction in the regulations.
- Two items of dry etching equipment are subject to export controls, but both specify a “high-speed gas switching valve with a switching time of less than 300 milliseconds.” However, such dry etching equipment doesn’t seem to exist, and even if it did, its practical significance is unclear.
- The range of deposition equipment subject to regulation in Japan is wider than that of the US “10.7” regulations, even though Japan’s market share in CVD equipment is only 6.2% and 5% for sputtering equipment. This raises doubts about the effectiveness of regulating deposition equipment with such small market shares.
METI is soliciting public comments on these regulations until April 29. It is essential for the industry that honest opinions are received and that export controls are made consistent and meaningful. The effectiveness of these regulations will ultimately depend on their clarity, coherence, and relevance to the equipment and processes that significantly impact the Chinese semiconductor industry.