Thread by @pstAsiatech

Japan finally released rules last week touted as aligning with US export controls released last year @ #October7Surprise. But Japanese rule did not mention China, and was far from a complete mirroring of the US controls. What is going on here? Well, its complicated. A thread.🧵

First, media reports continue to talk about a “three way agreement” btwn US, Japan, and the Netherlands. The Japanese rule release demonstrates that each country will release unilateral controls.

Japan in this case has adopted very different controls from the 7 October US package.
ft.com/content/768966…

Japan is proposing only adding 23 sets of equipment to its export control regime, and cites the rule as “supplementing” the Wassenaar Agreement in the notice, though these are not yet Wassenaar controls.

Second, Japan is not/not including either end use controls or domestic persons controls that were a critical part of the #October7Surprise.

In addition, there is no mention of memory in the Japanese release. Memory end use controls were included in the #7OctoberSurprise,.
thechinaproject.com/2022/11/11/mem…

Here is a flavor of the language used in the Japanese release from METI: “In the light of the increasingly severe security environment, the Government of Japan has decided to add 23 items of advanced semiconductor manufacturing equipment to its control list…

…for the purpose of preventing military end-uses, while supplementing the Wassenaar Arrangement and comprehensively taking into account factors such as the latest trend of export control by the countries concerned.”

By introducing this new measure, Japan intends to fulfil its responsibilities as a technology-holding country and contribute to the maintenance of international peace and security.

The 23 items: Cleaning (3 items), Deposition (11 items), Annealing (1 item), Lithography (4 items), Etching (3 items) and Inspection (1 item) public-comment.e-gov.go.jp/servlet/Public…

METI chief Yasutoshi Nishimura also was at pains to avoid the impression that the controls were targeting China. The ministry did not explicitly mention China in its statement...

..but Nishimura said the restrictions were part of Japan’s responsibility as a technological nation to contribute to international peace and stability. “We do not have one particular country in mind with these measures,” he said.

The range of companies affected by the controls is likely go beyond tool leaders like Tokyo Electron (TEL), Nikon, and Canon, and could include as many as 10 firm, but more likely only 5 or 6, including blue-chip tech group Advantest.

Chinese semiconductor firms have been stockpiling tools + materials in anticipation of the Japanese export controls. Interestingly, one Chinese fab official noted that “the 23 devices were basically what we expected, and we thought there would be more equipment exports affected.”

A Japanese semiconductor equipment distributor, who did not want to be named, indicated his firm had rushed to ship orders to Chinese fab customers in anticipation of the ban coming into effect in the second half of the year.

A critical unknown is whether Japanese tool makers currently servicing equipment at Chinese fabs covered by US controls will continue to fulfill contractual obligations, this seems likely. They have been working since October @ affected Chinese firms such as YMTC, CXMT, and SMIC.

Japanese and Dutch government and corporate officials almost certainly want to avoid the very disorderly process that occurred after 7 October, where US toolmakers had to pull personnel from facilities in China...

...opening up the firms to liability, along with substantial lost revenue from existing contracts. wsj.com/articles/u-s-s…

The US Commerce Department is likely to soon release updates to the 7 October rules based on comments received during an extended comment period. These adjustments are likely to focus on definitions of facilities...

...to clarify whether firms need licenses for personnel or equipment going to parts of Chinese facilities that may not be working on technologies covered by technology end use controls.

The Dutch government has still not released further details of rules to align with the 7 October controls. In early March there were plans--to take effect before summer--to implement new controls on some SME, according to a letter from the Trade Minister to parliament.

Dutch giant ASML subsequently indicated that the new restrictions would target the most advanced immersion lithography systems, but would take time to come into effect.

ASML will need to apply for new export licenses for shipment of the firm’s most advanced immersion DUV (Deep Ultraviolet Photo-lithography) systems due to these upcoming regulations.

Critical to note is that the new Japanese and Dutch rules will require a license application process, and it is unclear how export control officials will implement a licensing regime around all the equipment included on the various lists.

The US Commerce Department is likely to issue its own updated list of equipment to be covered under a new category, 3B090, included in the #7OctoberSurprise package.

One of the goals of the semiconductor conductor equipment controls is to restrict the ability of Chinese fabs to manufacture “logic integrated circuits using a non-planar architecture or with a production technology node of 16/14 nm or less”. federalregister.gov/documents/2022…

The ”non-planar” language, which has been mostly ignored in looking at the 16/14 nm end use controls represents an effort to prevent Chinese fabs from moving to more advanced 3D semiconductor manufacturing processes, like FinFET and GAAFET.

The Japanese controls will likely supplement the list in the #7OctoberSuprise 3B090 category, by including tools, likely from TEL, that are critical to non-planar architectures.

All 14 nm nodes and below use FinFET (fin field-effect transistor) technology, a type of multi-gate MOSFET technology that is a non-planar evolution of planar silicon CMOS technology.

YMTC has been testing locally manufactured tools for some time, and is at least claiming to be able to overcome some of the #7OctoberSurprise limitations. However, new Japanese and Dutch controls are likely to make this more difficult. ft.com/content/9ad412…

On the logic side, foundry leader SMIC has been working towards mass production of its FinFET based 14 nm node + hinting at 7 nm and 5 nm class production processes.

But since being added to the Entity List in 2020, SMIC has been careful to make public details of its process roadmap. tomshardware.com/news/smic-mass…

US efforts appear designed to choke of more tool inputs that would allow Chinese foundries to move below 14 nm with non-planar architectures...

...as SMIC has been able to get use its existing immersion DUV systems to get to some level of production at 7 nm node class. This without access to cutting edge EUV systems.

Finally, Chinese toolmakers like Naura and AMEC are moving up the technology ladder and were already taking market share from US toolmakers before the #7OctoberSurprise package.

The race is now on to de-Americanize Chinese semiconductor manufacturing supply chains, while the US pushes Japan and the Netherlands to plug gaps on non-planar process tools. The #USChinaTechColdWar continues to deepen.

YMTC management has assured production engineers it will be able to source key manufacturing tools from ASML, using older models not covered by a new lists from US, Japan, and Netherlands restricting exports, according to three company engineers.