The Netherlands and Japan join the United States in restricting chip exports to China

Japan and the Netherlands will limit exports of chipmaking tools to China after reaching an agreement with the United States aimed at making 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 deal 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 an important step in US efforts to work with allies to hamper Chinese efforts to develop its semiconductor industry.

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

In October, the United States announced unilateral export controls aimed at complicating Chinese efforts to obtain or develop advanced semiconductors for use in supercomputers and other military applications, such as intelligence artificial intelligence, nuclear weapons modeling and hypersonic weapons.

The U.S. chipmaking tool groups that dominate the industry – Applied Materials, Lam Research and KLA – feared the October ruling would impose restrictions on them, but not ASML and Tokyo Electron. At the time, Alan Estevez, the Commerce Department’s top export controls official, justified the move, saying it would prove to allies that the United States had «skin in the game» and was ready to make tough decisions.

Estevez and Tarun Chhabra, the National Security Council official behind the decision, have stepped up efforts in recent months to win over allies during visits to Tokyo and The Hague.

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

Tokyo and The Hague also fear being perceived as having embraced a US policy specifically targeted at China.

Dutch Prime Minister Mark Rutte said this week that while public attention on smart tool exports had focused on Japan, the Netherlands, the United States and China, the discussion was » wider than that».

The increased pressure on allies in recent months came after US national security adviser Jake Sullivan signaled a significant shift in policy in September. In a speech, he said the United States should abandon its «sliding scale» approach of trying to keep two generations of chips ahead, and instead «keep as wide of a lead as possible.»

Rutte told the Financial Times in an interview that the Netherlands agreed with those who argued that high-end Western chips should not be used in some countries’ weapons. He said Western nations and Asian partners must maintain their «lead» 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 reach a «solution with the many partners with whom we are discussing» and added that «The Hague was coordinating with everyone».

In a statement, ASML said it understood «that steps have been taken towards a government-to-government agreement which we believe will focus on advanced chip manufacturing technology, including, but not limit, advanced lithography tools.Before it comes into force, it needs to be detailed and implemented in legislation, which will take time.

ASML added that based on comments from government officials and its understanding of the timing, «we do not expect these measures to have a material effect on the expectations we have published for 2023.»

Bloomberg first reported the deal.

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