China has threatened severe economic retaliation against Japan if Tokyo further restricts sales and servicing of chipmaking equipment to Chinese firms, complicating US-led efforts to cut the world’s second-largest economy off from advanced technology.
Senior Chinese officials have repeatedly outlined that position in recent meetings with their Japanese counterparts, people familiar with the matter said.
Toyota Motor Corp privately told officials in Tokyo that one specific fear in Japan is that Beijing could react to new semiconductor controls by cutting the country’s access to critical minerals essential for automotive production, the people said, declining to be named discussing private affairs.
Photo: Reuters
Toyota is among the most important companies in Japan and is deeply involved in the country’s chip policy, partly reflected in that it has invested in a new chip campus being built by Taiwan Semiconductor Manufacturing Co (台積電) in Kumamoto, one of the people said.
That makes its concerns a major consideration for Japanese officials, in addition to those of Tokyo Electron Ltd, the semiconductor gear-maker that would be principally affected by any new Japanese export controls.
The US has been pressuring Japan to impose additional restrictions on the ability of firms including Tokyo Electron to sell advanced chipmaking tools to China, part of a long-running campaign to curtail China’s semiconductor progress.
With those talks, senior US officials have been working with their Japanese counterparts on a strategy to ensure adequate supplies of critical minerals, some of the people said, especially as China imposed restrictions on the exports of gallium, germanium and graphite last year.
The concern about Toyota has some historical precedent. In 2010, China temporarily suspended exports of rare earths to Japan after a clash in waters of the East China Sea claimed by both sides.
The move shook Japan’s electronics sector and threatened to choke off global supplies of high-power magnets produced in Japan employing rare earths from China. Tokyo has since worked with mixed success to reduce its reliance on Chinese rare earth imports.
The administration of US President Joe Biden is confident that they can assuage Tokyo’s concerns and reach an agreement with Japan by the end of this year, some of the people said.
However, there are more aggressive options: Behind the scenes, the US has been wielding a power known as the foreign direct product rule (FDPR), which allows Washington to control sales of products made anywhere in the world, provided they use even the smallest amount of US technology.
In the current talks, US officials so far have refrained from invoking that authority against Japan and other key allies, which see the rule as a draconian step. A senior administration official said the US would prefer to reach a diplomatic solution, but would not rule out the use of the FDPR.
South Korean Minister for Trade Cheong In-kyo said the US should offer incentives and more flexibility to encourage allies to collaborate on China chip controls.
“For countries or companies trying to comply with the US in good faith, there should be some kind of carrots,” Cheong said in his first interview with media since he took office in January. “That would help US policy be embraced more easily.”
South Korea is unable to send China the types of chipmaking equipment that would enable next-generation technology, Cheong said.
He said he anticipates overall semiconductor trade between the two countries to decline in the long run due to various limitations.
Cheong declined to specify what US incentives would be welcome, or comment on whether Seoul and Washington are in talks over export controls on the latest technology.
He said his country would respond to any additional restrictions by exploring ways to reduce business disruptions.
“We’ll have to find a way to the extent that the impact on our companies’ business is minimized,” he said.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his