US urges allies to squeeze China further on chip technology

The US government is pressing allies including the Netherlands, Germany, South Korea and Japan to further tighten restrictions on China’s access to semiconductor technology, a controversial effort that’s drawing resistance in some countries, according to people familiar with the matter.

The Biden administration’s latest push is aimed at plugging holes in export controls it’s levied over the past two years and restraining China’s progress in developing domestic chip capabilities, said the people, who asked not to be identified discussing private deliberations. For example, the US is urging the Netherlands to stop ASML Holding NV from servicing and repairing sensitive chipmaking equipment that Chinese clients purchased before limits on sales of those devices were put into place this year, said the people.

The US also wants Japanese companies to limit exports to China of specialized chemicals critical for chipmaking, including photoresist, they said. Japan is home to several leaders in photoresist, including JSR Corp. and Shin-Etsu Chemical Co.

Tokyo and The Hague have responded coolly to Washington’s latest push, arguing that they want to assess the impact of their current curbs before considering tighter measures, some of the people said. US Commerce Department officials raised the issue in Tokyo during a meeting on export controls last month, according to one of the people.

Representatives at ASML, the Dutch trade ministry and Japan’s Ministry for Economy, Trade and Industry declined to comment. In Washington, the National Security Council and the US Commerce Department also declined to comment.

The Biden administration has taken aim at China’s semiconductor industry since 2022, imposing sweeping controls on the export of advanced chip-making machines and sophisticated chips like those used to develop artificial intelligence. Japan and the Netherlands, the two key countries where chip-making equipment is developed, joined the US effort last year.

But holes still remain, particularly in the ability of Japanese and Dutch engineers to continue doing some equipment repairs, and in the flow of spare parts that are used in semiconductor manufacturing equipment.

US officials got a shock last August when China’s Huawei Technologies Co. unveiled a smartphone powered by a homemade chip that is more than a generation ahead of where the US had sought to halt the Asian country’s progress.

US Commerce Secretary Gina Raimondo has vowed to take the “strongest possible” action following the Huawei breakthrough, while Republican lawmakers have called for a complete block of Huawei and its chipmaking partner Semiconductor Manufacturing International Corp.’s access to US technology. 

The latest US push includes an effort to tighten existing limits. ASML needs a license to service and repair restricted gear in China, but the Netherlands has been somewhat lax about approval, according to one of the people. The US wants the Netherlands to take a more stringent approach, the person said.

The US also wants to draw more countries into its export-control blockade. The Biden administration is trying to bring Germany and South Korea into an agreement that already includes Japan and the Netherlands, since all four countries are home to key firms in the semiconductor supply chain, according to the people. 

For Germany, one of the critical players is Carl Zeiss AG, a specialized glass maker that supplies ASML with the optical components necessary for advanced chip production. The US wants Germany to get Zeiss to pull back from shipping such components to China, the people said.

Dutch officials also hope that Germany will join the export control group, according to the people, and the Biden administration is pushing for an agreement before the G7 summit in June. Berlin last year mulled over whether to restrict exports of chip chemicals to China, but Chancellor Olaf Scholz, who is slated to visit China in April, has not yet taken a stance on the issue, according to the person. Scholz’s deputy Robert Habeck, meanwhile, is visiting the US this week and will meet Raimondo during his trip. 

In addition, the US has held talks with South Korea on chip export controls, given the country’s leading role in producing chips and supplying spare parts for chip-making equipment. The two countries launched a structured dialogue in February after US officials asked their counterparts in Seoul to join the multilateral group last year, according to some of the people.