China threatens retaliation against Japan over chip restrictions
China has recently threatened serious economic retaliation against Japan if it imposes further restrictions on the servicing and sale of chip manufacturing equipment to Chinese companies. It is reported that China could respond by restricting Japan’s access to minerals essential for car production.
Cars are one of Japan’s biggest exports, and Toyota is one of the most influential organizations in the country. Toyota has also invested heavily in Taiwanese chipmaker TSMC’s Kumamoto plant, so would certainly be among the hardest hit by Japan’s potential new export restrictions.
This comes as the US has been pressuring Japan to more closely align with its efforts to curb Chinaβs technological power, particularly in its semiconductor strategy. The US previously imposed an embargo on China to stop the export of its most advanced chips (used primarily in military hardware), but some companies have reportedly been evading the ban.
Chip war
China’s domestic industry is not yet capable of producing the most advanced chips that power some of the technologies it leads in (particularly AI), but it has gained access to the capabilities via cloud computing services to circumvent US export restrictions.
The US recently funded a program to Establish chip production on US soilbut as it stands, Taiwan accounts for 68% of the semiconductor market. US officials are said to be working with Japanese counterparts to protect supplies of critical materials.
Toyota and chipmaker Tokyo Electron are among the companies most at risk if exports are affected, with shares in the latter falling nearly 2% on news of tense relations between Japan and China.
It is not yet clear whether Japan will bow to US demands and impose export restrictions, or what specific consequences this would have for Japanese industry. Biden is said to be confident that an agreement will be reached by the end of the year.
Via Bloomberg.