Germany Considers Limiting Chemical Exports to China for Semiconductor Manufacturing

JAKARTA - The German government is considering limiting exports to China of chemicals used to produce semiconductors as part of efforts to reduce its economic exposure to the Asian supereconomic power, Bloomberg reported on Thursday, April 27.

The move is still in the early stages of discussion, but the officials involved in the talks are aware that such a move could damage business ties with Beijing. Merck KGaA and BASF, two German chemical companies that could be hit by the export restrictions if implemented, declined to comment.

This will also be the latest step that is being considered by Germany as they re-evaluate relations with China. Chancellor Olaf Scholz's coalition government is pushing for fairer market access to its largest trading partner but is also growing wary of Beijing as a strategic rival.

The quickest and most practical way to implement export controls is to include the goods and services concerned on Germany's national dual-use register. German Economy Minister Robert Habeck proposed in March that Berlin could impose restrictions on exports to China to prevent Germany from losing its technological advantage. Germany, and the European Union as a whole, are pushing efforts to produce more chips domestically by offering subsidies.

Several partner countries have taken steps to cut off the supply of some materials for microchip manufacturing in China. The government of the Netherlands, home to semiconductor equipment manufacturers ASM International and ASML Holding, last month planned to further restrict exports of semiconductor technology to protect national security, joining US efforts to limit chip exports to China.

"Export controls related to technology must be constantly checked, always expanded and always updated," a government spokesman said at the time, as quoted by Reuters.

The German government is currently working on a strategy document on China to be released this year. Germany, and the European Union as a whole, are pushing for efforts to produce more chips domestically by offering subsidies.

Taiwanese chipmaker TSMC is in talks to open its first European factory in Germany, while US chipmaker Intel Corp chose the German city of Magdeburg as the site for a new 17 billion euro chip-making complex last year. Germany had invited China's prime minister for talks in June and Scholz in November became the first leader from the G7 to visit Beijing since the COVID-19 pandemic.