The Biden administration is considering the strictest possible trade restrictions on Tokyo Electron Ltd. and ASML Holding NV if they continue to provide China with access to advanced semiconductor technologies.
According to Bloomberg, the U.S. plans to use the Foreign Direct Product Rule (FDPR), which allows it to control trade of foreign products containing even the smallest amount of American technology. This decision aims to limit China's access to critical chip-making equipment supplied by Tokyo Electron and ASML.
The U.S. has already started negotiations with Japan and the Netherlands, urging them to strengthen their measures against China. The implementation of the FDPR could force these countries to restrict their exports to China, impacting their economies.
The mere discussion of these measures has led to a decline in the stock prices of major semiconductor equipment manufacturers, including Tokyo Electron, Lasertec Corp., Screen Holdings Co., ASML, and American companies Applied Materials, Lam Research, and KLA Corp.
American companies believe these restrictions are unfair, as they harm U.S. businesses more than they slow down the development of China's technology sector. They are calling for greater cooperation with allies to avoid circumventing existing restrictions.
An alternative proposed by the American chip industry is to expand the so-called unverified list of entities, which would require special licenses for trade. U.S. business representatives are not advocating for the immediate inclusion of ASML and Tokyo Electron on the list, but they believe such changes would send a strong signal to Japanese and Dutch companies.