Japan's Ministry of Economy, Trade and Industry (METI) has updated export restrictions on 23 additional categories of advanced semiconductor-related items, banning exports to China.

The amendment to the Foreign Exchange and Foreign Trade Act on 23 May covers chip equipment for wafer cleaning, film formation, heat treatment, exposure, etching, and inspection. Equipment related to extreme ultraviolet (EUV) and three-dimensional stacked memory are also included. 

The new terms will become effective on 23 July after a two-month notification period, Kallanish notes. 

Based on the new terms, 42 trade-friendly countries or regions with Japan will be given waivers on export restrictions. China is not on the list, which means the exports ban for the chip-making equipment will affect Chinese semiconductor companies and likely global supply.

China’s Semiconductor Industry Association claims the restrictions are too broad and will limit the development of the industry. Some say the move follows the rounds of restrictions and sanctions implemented by the US.

China has been one of Japan’s largest exporting countries for semiconductors. In 2022, the value of semiconductor manufacturing equipment exported from Japan to mainland China exceeded JPY 820 billion ($6.02 billion), about 30% of Japan’s total semiconductor exports of that year. 

With the new regulation, Japanese supplier Tokyo Electron expects its annual revenues to fall 23% from the previous year to JPY 1.7 trillion, according to the Financial Times

“This is an abuse of export control measures, a serious departure from free trade and international economic and trade rules, and will seriously damage China and Japan,” says the Chinese commerce ministry.

Urging Japan to “immediately correct its wrong practices,” the Chinese government warned that the amendment will not only hurt the economic and trade cooperation between China and Japan, it will also “impact the security and stability of the global semiconductor industry chain.”

Meanwhile, China’s Cyberspace Administration decided to ban domestic key information infrastructure operators from using products from US’s Micron claiming cybersecurity concerns based on the Network Security Law and other laws and regulations.

The automotive industry has only just started seeing signs of better chip supply conditions, enabling higher production rates. Constraints were expected to ease in the second half of the year, but as geopolitical tensions rise, the industry could be heading towards another bumpy ride.