China Launches Chip Material Probe as Export Curbs on Japan Take Effect
This article first appeared on GuruFocus.
China’s Ministry of Commerce has initiated an anti-dumping investigation into dichlorosilane imported from Japan, a material widely used in thin films for logic, memory and analog semiconductors. The probe is expected to run for up to one year from Wednesday, with the option of a further six-month extension. The move comes shortly after Beijing announced immediate export controls on dual-use items shipped to Japan that could enhance military capabilities, prompting a formal protest from Tokyo. Japan’s Foreign Ministry said the measures deviate from international practice, while Chief Cabinet Secretary Minoru Kihara indicated the government is still examining the scope and potential implications.
Market attention has increasingly centered on how far China’s restrictions could extend, particularly around rare earths, where Japan relies on China for around 70% of imports as of 2024, according to the Japan Organization for Metals and Energy Security. State-run China Daily reported that Beijing is considering tighter export license reviews for certain medium and heavy rare-earth-related items, which are used across batteries, commercial electronics and military equipment. Takahide Kiuchi of the Nomura Research Institute estimated that if rare-earth restrictions were to last three months, Japan’s economic output could be reduced by about 0.11%, or roughly 660 billion. Against this backdrop, Toyo Engineering Corp rose as much as 20% on Tuesday, while Toyota Motor Corp (NYSE:TM) fell as much as 3%, marking its largest decline since early November.
The trade measures are unfolding alongside a diplomatic standoff tied to remarks made in early November by Japanese Prime Minister Sanae Takaichi regarding Taiwan, which Beijing has explicitly linked to its export controls. Analysts at Teneo suggested the ambiguity of China’s actions may be deliberate, potentially pressuring Tokyo by raising concerns over the availability of critical industrial inputs. China’s dual-use export control list spans more than 800 items, including chemicals, electronics, sensors, and aerospace- and shipping-related technologies, indicating the impact could extend beyond rare earths and semiconductors. Japan has said it will continue to assess the details and consider responses, while reaffirming coordination with the US as the dispute adds another layer of uncertainty for regional supply chains and investors.
