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US chip-gear makers told to wait for relief from China curbs

Secretary of Commerce Gina Raimondo had a sobering message for US makers of chipmaking equipment this week: you’ll 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 will cost them billions of dollars in revenue even as their main competitors in Europe and Japan face fewer limits on China sales.

Reaching the accord, aimed at levelling 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 October 7 to limit China’s access to advanced chips and semiconductor-manufacturing equipment made with US technologies. Raimondo made the comments when she met representatives from equipment makers including Lam Research Corp. and KLA Corp., on Wednesday, said the people, who requested anonymity discussing a non-public interchange.

A spokeswoman for the US Department of Commerce declined to comment. Representatives of Lam Research and KLA did not immediately respond to requests for comments.

The global chip-production equipment market is dominated by US companies Lam, KLA, Applied Materials Inc., as well as ASML Holding in the Netherlands and Japan’s Tokyo Electron. 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 Research and KLA have warned investors that the new export control measures will cut into their revenue. The risk for them is that – until the restrictions apply in a more even-handed way – foreign peers will win market share in China, generating added revenue that in turn can be ploughed into developing new products.

While the overall market for chipmaking gear will shrink next year, according to estimates, analysts project that the three American companies will 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 slated 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 said last week that he expects a deal with allies to be reached in the near term. He said he wants rules for American companies to be “fair with their competition across the globe, and it’s fair for their competition with each other,” adding that he and other officials such as National Security Adviser Jake Sullivan and Raimondo are talking to allies about the issue. South China Morning Post

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