Japan restricts semiconductor exports to China, and industry insiders say it will increase independent innovation and domestic substitution

Reporter Jia Li

At the regular press conference of the Ministry of Commerce held on May 25, regarding the export control measures issued by the Japanese government for 23 kinds of semiconductor manufacturing equipment, Shu Hengting, spokesperson of the Ministry of Commerce, said that this is an abuse of export control measures, a serious deviation from free trade and international economic and trade rules, which will seriously damage the interests of Chinese and Japanese enterprises, seriously damage China-Japan economic and trade cooperation, and impact the security and stability of the global semiconductor industry chain and supply chain, and China firmly opposes this.

"In the face of the external impact on the semiconductor industry chain, the domestic response strategy is positive and cautious. The association advocates all walks of life to jointly maintain the prosperity and stability of the global semiconductor industry chain and supply chain. Relevant people from the China Semiconductor Industry Association told the "Securities Daily" reporter.

Impact the global semiconductor industry chain supply chain security and stability

According to Xinhua News Agency, on May 23, the Japanese government officially introduced export control measures for semiconductor manufacturing equipment, which will be implemented from July 23. Including lithography, etching, heat treatment, cleaning, testing and other 6 categories of 23 kinds of semiconductor manufacturing equipment (or items), mainly for high-end semiconductor manufacturing equipment, the controlled items in the list need to obtain a license from the Ministry of Economy, Trade and Industry when exporting to Chinese mainland, Russia and other regions. On May 25, a spokesperson for the Ministry of Commerce said that Japan should proceed from safeguarding international economic and trade rules and China-Japan economic and trade cooperation, immediately correct erroneous practices, avoid relevant measures that hinder the normal cooperation and development of the semiconductor industry of the two countries, and effectively maintain the stability of the global semiconductor industry chain and supply chain. China reserves the right to take measures and resolutely safeguard its legitimate rights and interests.

On April 28, the China Semiconductor Industry Association issued a solemn statement on the Japanese government's plan to expand the scope of export control of semiconductor manufacturing equipment. The statement said that the association has submitted opinions to the Ministry of Economy, Trade and Industry of Japan on 23 kinds of equipment, mainly including that the scope of controlled items is too broad, far exceeding the internationally accepted list of controlled items, causing great trouble to relevant enterprises. Vague expressions of controlled items may affect the mature process supply chain, and the expansion of export controls should be prevented, the number of controlled items should be reduced, and supply chain interruptions should be avoided. The control measures will bring great losses to the interests of relevant Japanese enterprises, and then lack sufficient profitability to support their R&D innovation and technological iteration, and weaken the competitiveness of Japanese enterprises in the international market.

It is reported that Japan's export control measures, 23 categories of products including extreme ultraviolet (EUV) related products manufacturing equipment and storage elements three-dimensional stacking equipment, etc., domestic affected enterprises are mainly semiconductor and pan-semiconductor foundry, IDM related enterprises.

"This restriction mainly has fluctuations and impacts on manufacturing and supply chain enterprises of cutting-edge products with a manufacturing line width below 10-14 nm, and to a certain extent, it will affect the security and stability of the global semiconductor industry chain supply chain." Wang Liansheng, director of the China Electronics Industry Standardization Technology Association, said in an interview with the "Securities Daily" reporter.

According to Wang Haoyu, managing director of Junshan Asset Management, Japan's export control of 23 kinds of semiconductor manufacturing equipment means that China's semiconductor manufacturing companies need to pay higher costs and time costs to obtain these equipment. "Rising semiconductor prices could be transmitted downstream to electronics manufacturing. Semiconductors are the core components of consumer electronics, and the limited supply of domestic semiconductors will lead to a shortage of these electronic products, and China is an important global consumer electronics market, currently ranking first in production and sales, which will adversely affect global consumers. ”

Under this situation, the general direction and sense of urgency of domestic enterprises to continuously increase independent innovation are also more important. Wang Liansheng suggested that relevant manufacturing enterprises and supply chain enterprises should make reserves of relevant products before the promulgation and implementation of this decree; Actively seek international or domestic alternatives; Give full play to the strength of non-governmental industry organizations and supply chains, cooperate with the government's UN appeals, and promote the stable and sustainable development of the industrial chain and supply chain.

Localization ushered in a broader space and new opportunities

In the secondary market, according to Choice data, on May 26, as of press time, the trend of the A-share semiconductor sector was divergent, and 78 of the 107 concept stocks rose, of which Tuojing Technology, Puran Shares, and Anji Technology all rose by more than 7%. Most of the rising concept stocks are concentrated in semiconductor equipment and materials industrial companies with localized concepts, while semiconductor manufacturing companies affected by Japanese equipment and material exports have seen a correction.

The implementation of export control measures in Japan this time will force the implementation of localized substitution of related products and promote the industrial chain to increase self-research. At present, Chinese mainland has a relatively high dependence on Japanese lithography, etching and heat treatment equipment. According to Chinese customs, in 2022, Japan accounted for 28%, 31% and 59% of the Chinese mainland imported stepping repetitive lithography machines, ion etching equipment, and heat treatment amounts, respectively. Huajin Securities recommends paying attention to leading enterprises with outstanding scientific research and innovation capabilities, excellent product performance, and strong supply chain control capabilities in areas with high dependence on Japanese equipment.

"In the face of an increasingly severe international environment, what China needs to do is to make good use of market advantages and domestic substitution. China accounts for about one-third of Japan's equipment export market, and this export control is actually a double-edged sword, which is unfavorable to Chinese and Japanese companies. In addition, such export controls will accelerate the process of domestic substitution of China-related equipment and create more commercialization opportunities for Chinese-related equipment manufacturers. Li Keyi, chief expert of Yuanhe Semiconductor Technology Co., Ltd., said in an interview with a reporter from Securities Daily.

CITIC Securities believes that in the short term, it is recommended to pay attention to the equipment/materials that Japanese and Dutch manufacturers occupy leading positions and can achieve domestic substitution; In the long run, it is recommended to pay attention to related companies in various links such as equipment, parts, and materials that benefit from the acceleration of domestic substitution.

"Japan's export control will hinder the manufacturing of domestic mobile chips, automotive-grade chips and memory chips in the short term, and there will be a large gap in optical, chemical raw materials, core reagents and key equipment in the manufacturing link of the semiconductor industry chain, which is providing opportunities for domestic enterprises to accelerate their development." Chen Jia, a researcher at the International Monetary Institute of Chinese Minmin University, told the "Securities Daily" reporter.

He believes that the semiconductor industry chain is long, and innovation in upstream key technologies and materials involves a wide range of areas and is highly dependent on accumulation. China should achieve self-reliance and self-improvement in scientific and technological innovation in the chip semiconductor industry chain, it is urgent to increase independent innovation in the middle and upper reaches, local industrial chain policy innovation and grassroots supporting measures to keep up with the top-level design, further solve the problem of basic scientific research and the efficiency of the conversion of technological achievements, this sanction will stimulate Chinese-funded enterprises to increase self-research efforts to achieve import substitution.

From the perspective of industry trends, at present, the semiconductor industry has gradually entered the bottom-building stage. According to SEMI data, the contraction of global semiconductor manufacturing is expected to slow down in the second quarter of 2023 and is expected to gradually recover from the third quarter.

As the industry gradually ushers in the opportunity of recovery, Wang Haoyu believes that domestic industrial chain enterprises should seize the opportunity to strengthen self-research, optimize inventory management to relieve pressure, make risk assessment and contingency plans in advance, share technology, resources and markets in the supply chain, and jointly resist risks to ensure the stable and sustainable development of the industrial chain and supply chain in the face of challenges.

(Edited by Cai Shandan)