Netherlands and Japan join US in restricting chip exports to China

Japan and the Netherlands will restrict exports of chip manufacturing tools to China after reaching a deal with the US designed to make it harder for the Chinese military to develop advanced weapons.

Several people familiar with the trilateral agreement said the countries reached an agreement on Friday after a final round of high-level talks at the White House. The accord comes three months after Washington imposed unilateral export controls that barred US companies from selling advanced chipmaking equipment to Chinese groups.

The White House declined to comment. But the deal marks a significant milestone in US efforts to work with allies to hinder Chinese efforts to develop its semiconductor industry.

Joe Biden’s administration has been negotiating with the countries for two years but faced resistance because they were worried about the effect on their chipmaking tool companies, particularly ASML in the Netherlands and Tokyo Electron in Japan.

In October, the US announced sweeping unilateral export controls that were designed to complicate Chinese efforts to obtain, or develop, advanced semiconductors for use in supercomputers and other military-related applications, such as artificial intelligence, nuclear weapons modelling and hypersonic weapons.

The US chip manufacturing tool groups that dominate the sector — Applied Materials, Lam Research and KLA — were concerned that the October move imposed restrictions on them but not ASML and Tokyo Electron. At the time, Alan Estevez, the top commerce department official for export controls, justified the move, saying it would prove to allies that the US had “skin in the game” and was willing to take tough decisions.

Estevez and Tarun Chhabra, the National Security Council official who is the driving force behind the move, stepped up efforts in recent months to convince the allies during visits to Tokyo and The Hague.

Several people said the three countries had decided not to make the details public due to the sensitive nature of the discussions. Washington wanted to give Japan and the Netherlands space to decide how to communicate the restrictions. It remains unclear what mechanisms the countries will use to impose the restrictions on their chip tool companies.

Tokyo and The Hague are also concerned about being seen to have signed up to an American policy that is specifically targeted at China.

Dutch prime minister Mark Rutte this week said that while public attention on chip tool exports had been focused on Japan, the Netherlands, US and China, the discussion was “broader than that”.

The increase in pressure on the allies in recent months came after US national security adviser Jake Sullivan in September signalled a significant change in policy. In a speech, he said the US should abandon its “sliding scale” approach of trying to stay two generations of chips ahead, and instead “maintain as large as a lead as possible”.

Rutte told the Financial Times in an interview that the Netherlands saw “eye to eye” with those who argued that western high-end chips should not be used in the weapons of some countries. He said western nations and Asian partners had to maintain the “leading edge” on chips.

He added that the debate was broader than just one Dutch company. Rutte said he was “absolutely convinced” that it was possible to get to a “solution with the many partners we are discussing with” and added that “The Hague was co-ordinating with everybody”.

Earlier this week, ASML chief executive Peter Wennink told the FT he hoped the countries would agree on something that was “sensible” and not a deal that would have a “major impact” on the industry.

Bloomberg first reported the deal.

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