Japan's new semiconductor export control regulations come into effect

July 24 news, two months ago, the Japanese Ministry of Economy, Trade and Industry officially announced the "Foreign Exchange Law" amendments, the 23 chip manufacturing related equipment and materials included in the export control object, the policy has been officially effective on July 23.

Specifically, the semiconductor equipment categories newly included in Japan's export control include: 3 items of cleaning equipment (copper oxide film, drying method to remove surface oxides, wafer surface modification after single sheet cleaning), 11 items of film deposition equipment, 1 item of heat treatment equipment, 4 items of lithography equipment, 3 items of etching equipment (wet/dry/anisotropic high-end etching), 1 item of testing equipment.

Although Japan's official export control policy does not specify specific countries or regions such as China as the target of the control, the Japanese government stipulates that individual permission is required for all but 42 countries and regions, including friendly countries. China is not among Japan's "friendly countries," so exports to the Chinese mainland must obtain a separate license approved by Japan's Minister of Economy, Trade and Industry before they can be exported. The types of application documents and procedures required for a separate license will be extremely complicated, including the need to submit additional documents to prove the user's business qualification, the use of export products, the user's commitment documents and many other attachments.

Therefore, the industry pointed out that the formal implementation of Japan's export control policy may affect the upgrading and innovation of China's semiconductor industry. However, it will also affect the Chinese market for Japanese semiconductor equipment and materials manufacturers.

Data show that the compound annual growth rate of the global and mainland China semiconductor equipment market from 2016 to 2021 reached 20% and 36%, respectively, and the growth rate of the Chinese mainland market was higher than that of the world. Mainland China has been the world's largest semiconductor equipment market for three consecutive years, with sales of $28.3 billion in 2022, accounting for 26% of the global market. In 2022, the revenue scale of the semiconductor materials market in mainland China is $12.97 billion, accounting for nearly 18% of the global semiconductor materials market ($72.7 billion).

According to international statistics, Japan was previously one of the largest sources of semiconductor manufacturing equipment for China, and in terms of value, Japan will account for about one-third of China's imports in this field by 2022.

Obviously, Japan's implementation of export controls on relevant semiconductor equipment and materials to China will undoubtedly directly affect the income of relevant Japanese semiconductor equipment and materials manufacturers in China.

At the beginning of July, the Japan Semiconductor Manufacturing Equipment Association (SEAJ) slashed its forecast for 2023 Japanese semiconductor equipment sales for the second time, which is expected to decline by 23.0% year-on-year.

There are also reports that the number of license applications from Japanese suppliers to the Ministry of Economy, Trade and Industry will increase after the new restrictions in Japan come into effect.