Trump Administration Pushes Japan and Netherlands to Tighten Semiconductor Restrictions on China

Intensified Efforts to Curb China's Advanced Semiconductor Capabilities

The Trump administration is ramping up efforts to limit China's access to advanced semiconductor technology by urging key allies like Japan and the Netherlands to strengthen restrictions on their semiconductor equipment industries. Recent reports from Bloomberg reveal that U.S. officials have been actively engaging with their counterparts in Tokyo and The Hague, focusing on curbing maintenance services offered by major players such as Tokyo Electron and ASML to Chinese companies. This strategy mirrors existing U.S. policies that restrict American firms, including Applied Materials and Lam Research, signaling a concerted effort to align allied nations in suppressing China's semiconductor ambitions. The overarching objective is to hinder China's capacity to develop cutting-edge chips that are essential for artificial intelligence, military applications, and consumer electronics, thereby preserving the U.S.'s technological advantage over a growing global competitor.

This intensification builds on initiatives initiated under the Biden administration, which sought to curb China's technological ascendance through export controls and collaboration with allies. Bloomberg sources indicate that the Trump administration is not only reviving stalled Biden-era measures but also exploring new strategies to further tighten restrictions. Discussions have reportedly included limiting maintenance on equipment previously sold to China, a tactic that could gradually degrade the operational capacity of Chinese chipmakers. Although the Biden administration had secured verbal agreements from the Netherlands regarding these maintenance restrictions, resistance emerged following Trump's election victory, highlighting the delicate interplay between diplomacy and economic interests.

Japan has similarly faced mounting pressure, with U.S. officials scrutinizing Tokyo Electron's ability to service its equipment in China. This move sent shockwaves through the Japanese stock market, resulting in a 4.93% drop in Tokyo Electron's shares and a 6.54% plunge in Advantest's stock on the day the news broke. Beyond these maintenance restrictions, the Trump administration is contemplating targeted sanctions against specific Chinese semiconductor firms, including ChangXin Memory Technologies (CXMT) and SMIC, China's leading foundry. Sources suggest that initial discussions are underway to prevent these companies from acquiring U.S.-origin technology, a strategy previously abandoned due to resistance from allies but now being reconsidered. Notably, SMIC drew attention in 2023 for successfully producing a 7-nanometer chip for Huawei, underscoring China's advancing capabilities despite existing restrictions. Additionally, there is an ongoing push to further limit Nvidia's exports to China, reducing the types and volume of semiconductors the company can sell without special licenses—an initiative that was discussed but not fully pursued under Biden's Commerce Secretary Gina Raimondo. These measures reflect a hardline stance aimed at undermining China's pursuit of semiconductor self-sufficiency, a priority that aligns with Trump's broader trade and security agenda.

The administration's ambitions extend to refining AI regulations introduced during the latter part of Biden's term, which categorized countries into three tiers and established export caps on AI-enabling chips. Industry leaders, including Nvidia CEO Jensen Huang, criticized these regulations, and Trump officials are now reportedly seeking to enhance and streamline them. However, implementing these significant changes is unlikely to be immediate. With key government positions still being filled, new regulations could take months to materialize, and the response from Japan and the Netherlands remains uncertain. Both nations have declined to comment on Bloomberg's inquiries, leaving room for speculation regarding how far allies will yield to U.S. pressure. Japan's strong economic ties with China and the Netherlands' reliance on ASML's market presence in China add layers of complexity to the situation, suggesting potential friction ahead.

Historically, Japan and the Netherlands have played pivotal roles in the global semiconductor supply chain. ASML's monopoly on extreme ultraviolet (EUV) lithography machines is crucial for manufacturing the smallest and most advanced chips, while Tokyo Electron dominates in deposition and etching equipment. The U.S. has consistently leveraged its Foreign Direct Product Rule to exert control over exports involving American technology, indirectly influencing the policies of these allies. There are precedents for this dynamic: in 2020, Trump blocked ASML's sales to China, and in 2024, Biden urged both nations to tighten export regulations. The current discussions around maintenance restrictions echo those past efforts but introduce a new dimension—disrupting China's ability to sustain existing equipment could prove more impactful than merely blocking new sales, as it targets operational continuity rather than solely future growth.

Market reactions underscore the high stakes involved. The sharp declines in the stock prices of Tokyo Electron and Advantest mirror previous downturns—such as Tokyo Electron's 8.3% drop in July 2024 amid similar rumors—reflecting investor concerns over potential losses from China revenue and supply chain disruptions. China has also issued warnings of retaliation; for instance, in 2024, it threatened Japan in response to potential export curbs. Should maintenance restrictions be enforced, Chinese firms may experience equipment downtimes, which could hinder the production of advanced chips and widen the competitive gap with Western companies. This aligns with U.S. objectives but risks escalating tensions, potentially prompting tariffs or rare earth export bans from Beijing.

The broader implications extend into technology and geopolitics. Japan’s partnership with the U.S. has deepened through collaborative semiconductor research initiatives, yet its businesses remain cautious about antagonizing China. The Netherlands, on the other hand, faces the challenge of balancing ASML's profitability against diplomatic pressures. For the U.S., achieving success hinges on maintaining allied unity, but the road ahead is laden with trade-offs. As the Trump administration intensifies its efforts to restrict China's semiconductor access, the intricate interplay of innovation, economics, and international relations will significantly shape the global tech landscape in the coming years. Observing how Japan and the Netherlands navigate this high-stakes scenario will be critical in understanding the future dynamics of semiconductor supremacy.