U.S., Japan and the Netherlands to restrict China’s chip production capacity

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The United States, Japan and the Netherlands secured a deal to restrict exports of some advanced chip-making machinery to China in talks that concluded on Friday, Bloomberg reported, citing people familiar with the matter.

The agreement would extend some export controls the U.S. adopted in October to companies based in the two allied nations, including ASML Holding N.V., Nikon and Tokyo Electron Ltd, the report said.

Officials from the Netherlands and Japan were in Washington discussing a wide range of issues in talks led by White House national security adviser Jake Sullivan.

John Kirby, the White House national security spokesperson, earlier said the officials were talking about issues that are “important to all three of us.” He added that “certainly the safety and security of emerging technologies is going to be on that agenda.”

A win for Biden

Getting the Netherlands and Japan to impose tighter export controls on China would be a major diplomatic win for President Joe Biden’s administration, which in October announced sweeping restrictions on Beijing’s access to U.S. chipmaking technology to slow its technological and military advances.

Keeping the deal under wraps

The Netherlands Prime Minister Mark Rutte, earlier said that it was not clear whether his government would disclose the result of talks with the United States over new export restrictions for the semiconductor industry.

Japanese firms would still be able to sell non-advanced products to China under the regulation, and any dip in shipments to China could be covered in the medium-to-long term by increasing output to regions such as the United States, Germany and India, said Akira Minamikawa, Senior Consulting Director at Omdia, a research company.

However, the Japanese government and companies may object to the restriction if it includes measures such as a ban on sending engineers to their equipment customers, Minamikawa said, adding that it “would bring too large an impact on their businesses.”