Japan plans to tighten export controls in fields such as semiconductors, and the Ministry of Commerce: This will seriously affect normal trade between Chinese and Japanese enterprises

A spokesperson for the Ministry of Commerce stated that semiconductors are a highly globalized industry that, after decades of development, has formed an industrial pattern of “you have me, I have you”. This is the result of the combined effect of market laws and enterprise choices.

According to the website of the Ministry of Commerce on April 29th, the Japanese government announced on April 26th that it plans to implement export controls on items related to semiconductors and other fields, and solicited public opinions on relevant measures.

A spokesperson for the Ministry of Commerce said, “We have noticed that the Japanese government has announced plans to implement export controls on semiconductor and other related items, and China expresses serious concern about this.”

A spokesperson for the Ministry of Commerce stated that semiconductors are a highly globalized industry that, after decades of development, has formed an industrial pattern of “you have me, I have you”. This is the result of the combined effect of market laws and enterprise choices. For a period of time, some countries have frequently generalized national security concepts, abused export control measures, artificially fragmented the global semiconductor market, seriously deviated from free trade principles and multilateral trade rules, and seriously impacted the stability of global industrial and supply chains.

A spokesperson for the Ministry of Commerce stated that the proposed measures by Japan will seriously affect the normal trade between Chinese and Japanese enterprises, harm others rather than oneself, and also damage the stability of the global supply chain.

('Semiconductors are a highly globalized industry (Xinhua News Agency image)',)(‘Semiconductors are a highly globalized industry (Xinhua News Agency image)’,)

Semiconductor industry

Li Xuan, a senior analyst in the technology industry at Haitong Securities, told a reporter from First Financial News that semiconductors are a global industry chain with division of labor, and have formed an industry pattern where you have me and I have you. Japan’s advantageous industries lie in global semiconductor materials and equipment, while China’s advantage lies in having a large downstream market and a layout in various upstream fields.

According to the Global Value Chain Development Report 2023 jointly released by the Asian Development Bank, Japan Trade Revitalization Agency, and the University of International Business and Economics, as of the early 1920s, the semiconductor global value chain was no longer limited to any specific company or territory. With the increasing complexity of chip design and production processes, a highly specialized enterprise ecosystem has emerged, which means that no economy can be self-sufficient throughout the entire semiconductor value chain.

“The implementation of export controls this time is mainly for scanning electron microscopy used to analyze nanoparticle images, as well as full gate transistor technology used to improve semiconductor design, as well as obtaining licenses for low-temperature CMOS circuits used in quantum computers and the transportation of quantum computers themselves. Due to being limited to certain fields and involving military purposes, it will not have a significant impact in the short term.” Li Xuan believes that in the long run, further attention should still be paid to improving the industrial chain.

A spokesperson for the Ministry of Commerce stated that China urges Japan to take into account the overall situation of bilateral economic and trade relations, promptly correct erroneous practices, and jointly maintain global industrial and supply chain stability. China will take necessary measures to resolutely safeguard the legitimate rights and interests of enterprises.

Survey: Protectionist measures are one of the biggest challenges in the semiconductor industry

Despite the semiconductor industry’s optimistic performance expectations for this year, companies are still concerned about trade protectionism measures.

According to the 2024 KPMG Global Semiconductor Industry Report, 172 global semiconductor industry executives surveyed by KPMG believe that there will be another cyclical rise in the semiconductor industry in 2024. 85% of respondents believe that the entire industry will experience growth, a significant increase compared to the 2023 survey (64%). However,

Dutch semiconductor equipment manufacturer AMSL stated in its annual report released in February this year that trade tensions and protectionism have brought enormous complexity to the entire supply chain and required processes. The company warns that further trade regulation may affect the terminal prices of semiconductors.

In addition to the export control measures proposed by Japan, the US government has recently provided direct subsidies totaling billions of dollars to five semiconductor companies, BAE Systems, Microelectronics, Global Foundries, Intel, and TSMC, in accordance with the US Chip and Science Act, encouraging chip manufacturers to invest in the US.

Chinese Ministry of Commerce spokesperson He Yadong recently responded to relevant questions by saying, “For a period of time, the United States has generalized the concept of national security, abused export controls and other measures, and artificially fragmented the global semiconductor industry chain. The United States provides huge subsidies and tax incentives to the local chip industry, and some clauses force companies to abandon China and the United States, which is clearly discriminatory and seriously violates market laws and international economic and trade rules, and will cause distortion to the global semiconductor industry chain.”

The Global Value Chain Development Report 2023 also points out that due to the complexity of the existing semiconductor global value chain organization and the high demand for technological capabilities and capital investment in cutting-edge chip manufacturing, pursuing self built chip factories through technological sovereignty may not be practical. This competition to build chip factories everywhere may lead to the fragmentation of the global semiconductor market, undermine the industry’s economies of scale and trust, and even lead to excess global semiconductor manufacturing capacity.

According to the scenario simulation prediction of the report, the most likely scenario in the future is that although the United States and the European Union have increased their chip production capacity through recent technology nationalist industrial policies, these additional capacities will be relatively conservative, not at the forefront of technology, and will not fundamentally change the competitive dynamics of the semiconductor global value chain.

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