'US Semiconductor Regulations Challenged by China at WTO, Japan and Netherlands Likely to Join (Comprehensive)'

[Asia Economy Reporter Jeong Hyunjin] It has been reported that Japan and the Netherlands, leading countries in semiconductor manufacturing equipment, have decided to join the United States in its semiconductor export controls against China. Although China has formally challenged this measure and filed a dispute resolution lawsuit with the World Trade Organization (WTO), the process is expected to take several years, which is likely to further corner China.

President Joe Biden of the United States [Photo by AP]

On the 12th (local time), Bloomberg News cited anonymous sources reporting that Japan and the Netherlands have, in principle, agreed to join the U.S. export controls and will announce related details within weeks. While they will not adopt all of the U.S. measures, they have decided to implement some parts. The sources indicated that Japan and the Netherlands are expected to prohibit the sale of equipment capable of producing advanced semiconductors of 14 nanometers (nm; 1 nm is one billionth of a meter) or more to China.

With Japan and the Netherlands joining the sanctions, the world’s top five semiconductor equipment companies?U.S. firms Applied Materials, Lam Research, KLA, Japan’s Tokyo Electron, and the Netherlands’ ASML, the world’s number one semiconductor lithography equipment manufacturer?are expected to participate in the control measures. Stacy Rasgon of investment advisory firm Sanford C. Bernstein evaluated, "China has lost both the method and opportunity to build advanced industries on its own."

The U.S. announced semiconductor export control measures against China last October. The measures effectively ban the export to China of certain semiconductor manufacturing equipment above a certain performance level, AI-related semiconductors, and specific semiconductors used in supercomputers. The Chinese government has strongly opposed these measures, arguing that they violate the principles of fair competition and international economic and trade rules.

The U.S. has pressured countries with major semiconductor manufacturing equipment companies, such as Japan and the Netherlands, to implement export controls against China similar to those of the U.S. Since China sources most of its semiconductor manufacturing equipment from overseas, blocking equipment procurement itself disrupts semiconductor production. Considering the semiconductor ecosystem, cooperation from these countries is essential to prevent the import of manufacturing equipment into China.

[Image source=EPA Yonhap News]

In this regard, the Chinese Ministry of Commerce issued a statement on the same day announcing the filing of a WTO lawsuit against the U.S. semiconductor export controls targeting China, stating, "China’s WTO complaint is a legitimate means to address China’s concerns and a necessary measure to protect China’s lawful rights and interests." It added, "The U.S. is abusing export controls by expanding the concept of national security," and criticized, "The U.S. is undermining normal international trade in semiconductors and threatening the stability of global supply chains. This is a typical protectionist tactic."

According to Bloomberg, with China’s formal WTO complaint, the U.S. must engage in consultations to resolve the issue within the next 60 days. If the issue is not resolved during this process, China can request the establishment of a panel for dispute resolution at the WTO. Bloomberg noted, "The WTO dispute resolution process alone can take several years," and "Even if China wins in this process, the U.S. can appeal again, effectively exercising a veto."

In fact, the recent WTO dispute settlement panel ruled that the U.S. violated WTO rules by imposing high tariffs on steel and aluminum produced in China and the European Union (EU) in 2018 to protect its domestic steel industry. China welcomed the ruling as an "objective and fair judgment," but the U.S. strongly rejected the "incorrect interpretation and decision" and maintained its tariff stance.

This content was produced with the assistance of AI translation services.