The U.S. semiconductor equipment industry has voiced the opinion that companies from allied countries, including South Korea and Japan, should also be subject to the same level of comprehensive regulations that they face in the process of exporting to China. There is speculation within South Korea that this move is primarily aimed at Japan, which is considered the real competitor by the United States, but there is heightened sensitivity about future developments.
According to the U.S.’s Federal Register on Jan. 31 (local time), the Semiconductor Industry Association (SIA) submitted a position paper to the Bureau of Industry and Security (BIS) of the Department of Commerce on Jan. 17, arguing that the US’s export controls on semiconductor equipment are more complex and comprehensive than those of allied countries, putting U.S. companies at a competitive disadvantage.
The SIA explained, “Competitors from Japan, South Korea, Taiwan, Israel, and the Netherlands can export equipment not subject to item-based export controls to advanced semiconductor factories in China.” In contrast, U.S. companies cannot export any equipment to China, even if it’s not listed for export control, if it’s used in advanced semiconductor manufacturing, nor can they provide related services, which they argue puts them at a competitive disadvantage.
Major U.S. semiconductor equipment companies, including Applied Materials (AMAT), KLA, and Lam Research, have reportedly submitted their own position papers supporting the SIA’s claims.
They suggest that the solution is for the U.S. government to persuade allied countries to introduce similar export controls, proposing a multilateral export control system where the U.S. and other semiconductor equipment-producing countries control the same items and follow the same licensing procedures.
The U.S. government is also considering such measures. Ellen Lord, who previously served as the under secretary of defense for acquisition and sustainment in the Trump administration, mentioned at an event hosted by the Korea Strategic Trade Institute in Washington D.C. on Dec. 12 that discussions are underway with allies like South Korea to create a new multilateral export control system to prevent advanced technologies from falling into the hands of adversary nations.
However, the reaction from the domestic semiconductor industry to these U.S. industry claims is that they are unlikely to have a significant impact. An industry insider commented, "These are just opinions from the U.S. industry; no actual policy has been decided, so it’s unclear how things will evolve. And although the discussion includes allied countries, it’s more likely aimed at competitors such as Japan rather than our country.”
In fact, the global semiconductor equipment market is dominated by the U.S. and Japan. According to TechInsights, a semiconductor market research firm, the top 10 companies in 2022 included Applied Materials (AMAT) from the U.S., ASML from the Netherlands, Lam Research from the U.S., Tokyo Electron (TEL) from Japan, KLA from the U.S., Advantest from Japan, Screen Holdings from Japan, ASM from the Netherlands, Kokusai Electric from Japan, and Teradyne from the U.S. The U.S. and Japan hold the majority of the spots.
U.S. and Japanese semiconductor equipment companies are expanding their global presence by leveraging advanced technologies, with China being a major market for them. For instance, AMAT reported that China accounted for 27% of its total sales for the fiscal year 2023, with this figure rising to 44% in the fourth quarter. TEL also cites China as its largest sales region globally, with the country accounting for around 40% of its total sales, though this figure varies quarterly.