US gear chip makers face long wait amid trade war

US Secretary of Commerce Gina Raimondo had a sobering message for US makers of chipmaking equipment this week: You will need to wait as long as nine months before Washington can reach an accord with US allies over strict new rules aimed at restricting China’s access to certain technologies.

The US is working on an agreement that would make companies in the Netherlands and Japan — home to some of the biggest makers of chipmaking gear — subject to limits on sales of such equipment to China.

US companies are already bound by the export controls, which they say would cost them billions of US dollars in revenue even as their main competitors in Europe and Japan face fewer limits on China sales.

Photo: Ann Wang, Reuters

Reaching the accord, aimed at leveling the playing field, could take six to nine months, Raimondo told representatives of the US companies, according to people with direct knowledge of the meeting.

Washington announced a new round of export control rules on Oct. 7 to limit China’s access to advanced chips and semiconductor-manufacturing equipment made with US technologies.

Raimondo made the comments when she met on Wednesday with representatives from equipment makers, including Lam Research Corp and KLA Corp, said the people, who requested anonymity discussing a non-public interchange.


The global chip-production equipment market is dominated by US companies Lam, KLA and Applied Materials Inc, as well as ASML Holding NV in the Netherlands and Japan’s Tokyo Electron Ltd.

Currently, the non-US suppliers have more latitude in doing business with China.

For the US triumvirate, restrictions on what their overseas competitors can ship to China cannot come fast enough.

Applied Materials, Lam and KLA have told investors that the new export control measures would cut into their revenue. The risk for them is that — until the restrictions apply in a more even-handed way — foreign peers would win market share in China, generating added revenue that in turn can be plowed into developing new products.

While the overall market for chipmaking gear is forecast to shrink next year, analysts project that the three US companies would suffer steeper revenue declines than their Japanese counterpart.


Washington is now preparing to amp up pressure on allies to block chip gear sales to China. Senior US National Security Council official Tarun Chhabra and Under Secretary of Commerce for Industry and Security Alan Estevez are scheduled to travel to the Netherlands for discussions on China-chip curbs later this month, Bloomberg News has reported, although no deal is expected to come out of the talks.

Estevez last week said that he expects a deal with allies to be reached in the near term.

He said he wants rules for US companies to be “fair with their competition across the globe, and it’s fair for their competition with each other.”

He added that he and other officials, such as National Security Adviser Jake Sullivan and Raimondo, are talking to allies about the issue.

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