America's hazy chip deal fogs market signals
HONG KONG, Jan 30 (Reuters Breakingviews) - At first glance, Washington's agreement on Friday with the Netherlands and Japan to suppress some chip-related exports to China looks like a diplomatic win. But the lack of detail suggests the United States still has a way to go to convince allies to sacrifice export revenue in the name of hobbling China's semiconductor industry.
Having unveiled sweeping new curbs targeting the People's Republic in October, American officials have lobbied friendly governments to follow suit. Companies like Dutch giant ASML and Tokyo Electron enjoy near-monopolies in chipmaking equipment, namely lithography machines and silicon-wafer coatings. Preventing them from selling to Chinese companies would deal a serious blow to Beijing’s technological progress.
It's a dilemma for officials in the Netherlands and Japan. ASML and Tokyo Electron currently generate 15% and 26% of annual sales from China, respectively, and the People's Republic is Japan's top trading partner. That may explain why both governments have declined to specify exactly what the new restrictions are. Dutch Prime Minister Mark Rutte even said that the details may not be disclosed.
That is hard for the market to price. Shares of Japanese suppliers including Tokyo Electron, ASML-rival Nikon and Canon all opened flat on Monday morning. Investors may be scratching their heads for some time. (By Robyn Mak)
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