Thread by @pstAsiatech

#October7Surprise Prospects for China getting around Oct 7 controls on semiconductor manufacturing equipment by enticing non-US vendors and governments to go against US preferences.
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As the very insightful @fudaoge notes, the de-Americanization option for foreign vendors is a tough one, and is caught by the US persons provisions added to 2018 ECRA but now weaponized: chinatechtales.wordpress.com/2022/11/06/as-…

Then there is the question of whether Japanese players would be willing to really fall on their sword on this one, including possibly going against METI. Already Tokyo Electron is putting out figures for losses resulting from controls in China: asia.nikkei.com/Business/Tech/…

TEL: "We are seeing changes and postponements in capital expenditures, mainly in memory," Kawai said.
TEL expects sales of new production equipment for memory products to fall 40% in second half of fiscal year, compared w/ first half ended in September. We will come back to this.

While there are no Japanese government regs similar to end use controls put in place October 7, TEL + other Japanese tool makers Nikon/Canon likely have voluntary internal controls that would have to be overridden for there to be major effort to replace US tool makers in China

Japanese officials and leading tool makers are looking for guidance at Dutch tool making giant #ASML. Senior US administration officials and export control experts will descend next week on The Hague for discussions with Dutch officials on the issue.

After at least a year or more of trilateral discussions, talks likely broke down over the specific controls in the 7 October package, which appear to have caught both Tokyo and The Hague off guard, US officials will have to persuade Dutch officials to go along under duress.

Raimondo's comments last week that it could be 6-9 months before trilateral agreement is reached seem off, as there will be need to align with rules much sooner to signal industry. Transposing them into domestic regulations will take much longer of course. japantimes.co.jp/news/2022/11/0…

The Chinese semiconductor industry continues to digest controls, but move has already put a major damper on sentiment in the sector and among investors.

Last year alone, China added 592 chip design firms, or about 11 new start-ups per week. Chinese semiconductor-focused cities like Shanghai, Beijing, Shenzhen, Wuxi and Nanjing had a total of 2,810 such firms by the end of the year

The situation has since changed drastically. During an event at November's Semicon China summit, four of five executives from Chinese chip firms predicted that 2023 would be worse than this year, adding that they are “preparing for winter.
scmp.com/tech/tech-war/…

Major players such as SMIC, are alreading warning about the long-term impact. co-CEO Zhao Haijun said on Friday on an earnings call that recent export controls from the United States will have an "adverse impact" on the company's production. reuters.com/technology/smi…

Hence, while the intent of end use controls may have been narrow, attempting to draw a line on domestic manufacturing capabilities, result is likely to be some consolidation, per SMIC, among major players, but significant long-term pessimism about overall direction of industry.

Memory sector is much different than logic, a commodity sector driven by market conditions and sensitive to price changes. Also questions about inclusion of memory in the 7 October package, for more, see: thechinaproject.com/2022/11/11/mem…