The United States' deputy commerce secretary has confirmed the existence of a "deal" with Japan and China that will limit exports of chip-making tools.

"We can't talk about the deal right now," Don Graves said on the sidelines in Washington, quoted by Reuters and the Guardian. "But you can certainly talk to our friends in Japan and the Netherlands."

Bloomberg, The New York Times and Reuters have written about the deal in the past few days. It follows a US decision to limit supplies of chip-making tools to Beijing in an attempt to limit its high-tech (including military) capabilities.

Not just selling chips

Since October, President Joe Biden's administration has also banned companies that use American technology or software from selling certain semiconductors to China.

Until now, however, the restrictions only applied to the chips - not the tools to create them. The fear in Washington is that if it has them, China will be able to simply manufacture anything it cannot buy from the US or other countries.

The Asian giant has invested heavily in its own chip manufacturing, but its factories still rely heavily on foreign-made equipment. The largest of these, SMIC (its chips are used in automotive products, IoT devices and some smartphones) was sanctioned by the US in 2020.

Why the Netherlands and Japan are important

Two major manufacturing companies, ASML and Tokyo Electron, are located in the Netherlands and Japan, respectively. The Netherlands is a leader in the creation of machines that use extreme ultraviolet lithography technology to produce chips; the export of these devices to China is prohibited. A few days ago, however, the New York Times wrote that the US is encouraging the Dutch government to also ban the export of machines with another, less developed technology called deep ultraviolet lithography.

Without the Netherlands and Japan, the US restrictions are difficult to implement, and an important task for the US is to ensure that the withdrawal niche of its manufacturers is not occupied by competitors.

After the US sanctions against SMIC, the export of ASML to it also stopped, but now it will not be possible for leading Chinese companies trying to compete with the leaders from Taiwan, South Korea and the US to find themselves without access to this equipment.

An email from Graves' ministry cited coordination with allies on technology export controls as a "priority" because a "multilateral" approach is more effective than a "unilateral" one. On Saturday, the New York Times noted that the three governments have not officially announced the agreement because the issue is sensitive. Both countries may also need to change their legislation for such sanctions to take effect.

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