Semiconductor Export Controls: Assessing Allied Coordination in US-China Tech War | Analysis

The Fragmented Front: Assessing Allied Coordination in US Semiconductor Export Controls Against China

The United States has significantly strengthened its semiconductor export controls against China through December 2024 and January 2025 updates, but critical gaps in allied coordination threaten to undermine the effectiveness of these strategic technology restrictions. The U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced comprehensive updates targeting advanced computing semiconductors and manufacturing equipment, representing the most aggressive measures since the initial October 2022 restrictions. However, as a recent CSIS analysis reveals, key allies including the Netherlands, Germany, Japan, South Korea, and Taiwan face legal, political, and economic limitations in implementing equivalent measures, creating a fragmented front in the technological competition with China.

What Are the December 2024-January 2025 Export Control Updates?

The latest U.S. semiconductor export control updates represent a significant escalation in technological containment efforts. According to Commerce Department announcements, the December 2024 measures expanded restrictions on advanced computing semiconductors, while January 2025 updates strengthened controls on semiconductor manufacturing equipment. These regulations specifically target:

• Advanced AI chips with performance thresholds above 4,800 tera-operations per second (TOPS)
• High-bandwidth memory chips critical for AI training systems
• Specific semiconductor manufacturing equipment for nodes below 14nm
• Enhanced due diligence requirements for foundries operating in China
• Expanded Foreign Direct Product Rule (FDPR) coverage to include more third-country transactions

The updates also added 37 Chinese entities to the Entity List, restricting their access to U.S. technology. These measures build upon the foundational October 2022 semiconductor export controls that initially targeted China's advanced computing capabilities.

The Critical Challenge of Allied Coordination

Netherlands: ASML and the Limits of European Consensus

The Netherlands, home to ASML—the world's only manufacturer of extreme ultraviolet (EUV) lithography machines—announced in January 2025 that it would tighten export controls on advanced semiconductor manufacturing equipment starting April 1, 2025. However, as Dutch government statements indicate, these controls apply only to specific measuring and inspection equipment and require case-by-case authorization rather than constituting a comprehensive ban. The Netherlands operates within the broader European Union framework, where consensus among 27 member states creates significant limitations on implementing U.S.-style extraterritorial controls.

Japan and South Korea: Economic Dependencies and Legal Constraints

Japan and South Korea, both critical players in the semiconductor supply chain, face unique challenges. Japanese companies like Tokyo Electron dominate the semiconductor equipment market, while South Korean giants Samsung and SK Hynix control substantial memory chip production. However, both nations maintain significant economic ties with China and lack equivalent legal tools to the U.S. Foreign Direct Product Rule. The recent revocation of validated end user status for TSMC, Samsung, and SK Hynix by December 31, 2025, demonstrates the complex balancing act these companies face between U.S. pressure and Chinese market access.

Taiwan: Geopolitical Sensitivities and Strategic Positioning

Taiwan's TSMC, which manufactures over 90% of the world's most advanced semiconductors, operates under particularly sensitive conditions. While Taiwanese authorities have generally aligned with U.S. export control objectives, they must navigate delicate cross-strait relations. TSMC maintains Chinese fabs several generations behind its most advanced designs with U.S. permission, but recent restrictions on equipment shipments to its Nanjing facility highlight the growing constraints. The US-Taiwan semiconductor relationship remains critical yet fraught with geopolitical complexities.

Strategic Implications of Fragmented Controls

The lack of coordinated allied implementation creates several critical vulnerabilities in the U.S. semiconductor export control strategy:

1. Supply Chain Leakage Points: Advanced semiconductor manufacturing requires equipment and materials from multiple countries. Gaps in allied controls create potential leakage points where Chinese entities can access restricted technologies through third countries.
2. Competitive Disadvantages: U.S. companies face unilateral restrictions while competitors from allied nations may continue certain exports, creating market distortions. A recent ITIF report estimates U.S. firms could lose approximately $77 billion in semiconductor sales in a full decoupling scenario.
3. Enforcement Challenges: Without coordinated enforcement mechanisms, circumvention becomes increasingly difficult to detect and prevent. The complexity of global semiconductor supply chains makes unilateral controls inherently porous.
4. Technological Innovation Impacts: Reduced revenue from Chinese markets could decrease R&D investment by U.S. semiconductor firms by an estimated 24% ($14 billion annually), potentially undermining long-term technological leadership.

Expert Perspectives on Allied Coordination

Industry analysts and policy experts emphasize the critical importance of allied coordination. "The effectiveness of semiconductor export controls depends entirely on allied implementation," notes a senior CSIS researcher. "While the U.S. has sophisticated legal tools like the Foreign Direct Product Rule, most allies lack equivalent authorities and face different political-economic calculations." The CSIS report concludes that success depends not just on legal authority but on allies' enforcement capacity and political willingness to act.

European policymakers express particular concern about extraterritorial application of U.S. controls. "We support technology security measures, but they must be developed through multilateral frameworks, not unilateral imposition," stated a European Commission official familiar with the discussions. This tension between unilateral U.S. action and multilateral European approaches represents a fundamental challenge to coordinated policy.

Future Outlook and Policy Recommendations

The fragmented nature of allied semiconductor export controls suggests several potential developments in 2025-2026:

• Increased diplomatic pressure on allies to harmonize control lists and enforcement mechanisms
• Potential expansion of multilateral frameworks like the Wassenaar Arrangement to cover emerging semiconductor technologies
• Growing Chinese efforts to develop domestic semiconductor capabilities, potentially accelerating technological self-sufficiency
• Continued tension between national security objectives and economic competitiveness considerations

Effective policy coordination will require addressing the legal authority gaps identified in the CSIS analysis while developing shared enforcement mechanisms and intelligence sharing protocols. The strategic implications extend beyond semiconductors to broader technological competition, making allied coordination a critical determinant of long-term success in the U.S.-China technology rivalry.

Frequently Asked Questions

What are the key December 2024-January 2025 semiconductor export control updates?

The updates expanded restrictions on advanced AI chips (above 4,800 TOPS), high-bandwidth memory chips, semiconductor manufacturing equipment for nodes below 14nm, enhanced foundry due diligence requirements, and added 37 Chinese entities to the Entity List.

Why is allied coordination critical for semiconductor export controls?

Semiconductor manufacturing involves equipment and materials from multiple countries. Without coordinated controls, Chinese entities can access restricted technologies through gaps in allied regulations, undermining the effectiveness of U.S. restrictions.

What limitations do U.S. allies face in implementing equivalent controls?

Allies often lack equivalent legal authorities like the Foreign Direct Product Rule, face different political-economic calculations with China, operate within multilateral frameworks (EU), and have varying enforcement capacities and domestic industry pressures.

How does the Netherlands' January 2025 export control update differ from U.S. measures?

The Dutch controls, effective April 1, 2025, apply only to specific measuring and inspection equipment, require case-by-case authorization rather than comprehensive bans, and operate within EU consensus frameworks rather than unilateral extraterritorial application.

What are the economic implications of fragmented semiconductor export controls?

Fragmented controls create competitive disadvantages for U.S. companies, potential supply chain leakage points, enforcement challenges, and could reduce U.S. semiconductor R&D investment by an estimated 24% ($14 billion annually) according to industry analysis.

Sources

CSIS Report: Understanding U.S. Allies' Current Legal Authority to Implement AI and Semiconductor Export Controls
Dutch Government: Export Controls on Advanced Semiconductor Manufacturing Equipment to be Tightened
CNBC: US Makes It Harder for TSMC, SK Hynix, Samsung to Make Chips in China
ITIF Report: Decoupling Risks: Semiconductor Export Controls Harm US Chipmakers and Innovation