Germany Considers Restricting Exports of Chemicals for Semiconductors to China

Germany: Germany is considering imposing restrictions on the amount of chemicals it exports to China that are used in the production of semiconductors, as the country grapples with the challenge of balancing its economic interests with national security concerns.

If implemented, this measure could have significant implications for industrial giants like BASF and Merck KGaA, both of whom are major suppliers of chemicals utilized in the manufacturing of processors. The chemicals in question include Trichloroethylene, Acetone, Isopropanol, and several other alcohols that are integral in the production of advanced chips.

Germany’s Economy Minister and Vice Chancellor, Robert Habeck, is collaborating with other European nations and the United States regarding the potential restriction of chemical exports used in chipmaking. Although the Biden Administration is not exerting pressure on Germany to join the coalition, it has indicated its willingness to cooperate on this issue. Any move to reduce the export of these chemicals would stem from Germany’s national dual-use list, which aims to prevent the use of items in military, chemical, biological, and nuclear weapons.

Germany is attempting to maintain strong relations with China but is considering taking action that would place it in line with the Netherlands and Japan. These countries have both enforced restrictions on exporting technology and goods necessary for semiconductor production in China. They have recently aligned with the U.S., and if Germany were to follow suit, companies seeking verification to sell to China would need to apply for a license. Moreover, if the companies produce DRAM chips below 18 nm, above 128 layers for NAND chips, or below 14 nm for logic chips, they would be faced with a "presumption of denial" standard.

China has decided to develop its own semiconductor equipment. However, it is deemed "essential" that the company can access the country. Contrastingly, Germany currently does not possess any semiconductor equipment companies. Nevertheless, the country is currently in negotiations with Intel to provide extra funding for the semiconductor manufacturer's production facility located in Magdeburg.

Europe has recently approved its Chips Act to enhance its manufacturing competency within the region, in a bid to reduce its dependence on U.S. and Asia. Majority of the chip production is concentrated in Asia primarily due to the presence of major foundries such as Taiwan Semiconductor (TSM) and Samsung, catering to chip requirements of global giants like Apple, Nvidia, Qualcomm and many others.