Tokyo

JAPAN'S Tokyo Electron, the world's No 3 supplier of semiconductor manufacturing equipment, will not supply to Chinese clients blacklisted by Washington, a senior company executive told Reuters.

The decision shows how Washington's effort to bar sales of technology to Chinese firms, including Huawei Technologies, is ensnaring non-American firms that are not obliged to follow US law.

China, which is locked in a crippling trade war with the United States, is pushing to build its semiconductor industry to reduce its reliance on US, Japanese and European suppliers for chip-making machinery.

"We would not do businesses with Chinese clients with whom Applied Materials and Lam Research are barred from doing businesses," the executive said, referring to the top US chip equipment firms.

"It's crucial for us that the US government and industry see us as a fair company," he added, citing Tokyo Electron's long US partnership since the 1960s, when it started off as an importer of US equipment. He did not want to be named given the sensitivity of the matter.

Another major Japanese chip equipment supplier is also considering halting shipments to blacklisted Chinese firms, a person familiar with the matter said. "The issue is beyond something we can decide on our own," said the person, who also declined to be identified.

Executives at other equipment suppliers said they were communicating closely with the Japanese industry ministry. "We haven't received any specific instructions from the ministry," one of the executives said. "We are aware that we could be in deep trouble if we take advantage of the US export ban to expand businesses with China."

The Tokyo Electron executive did not specify the names of the Chinese clients, but state-backed memory chipmaker Fujian Jinhua Integrated Circuit Co is currently on a list of entities that cannot buy technology goods from US firms.

A handful of other Chinese companies and research institutions are on a 'red list' that US companies have been advised to avoid.

Huawei's chip arm, HiSilicon, is a so-called fabless company focusing on chip design and thus is not normally a buyer of chip-manufacturing gear. But Huawei also faces major risks from non-US suppliers adhering to the US blacklist.

British chip designer ARM, owned by Japan's SoftBank, has halted relations with Huawei, potentially crippling the Chinese company's ability to make new chips for its future smartphones. But Taiwan Semiconductor Manufacturing Co, global leader in chip production and maker of many Huawei chips, has said it would continue to be a supplier to Huawei. REUTERS