Hundreds of major Japanese and Taiwanese corporations rush to exit China

Faced with growing threats from Beijing, Japanese, Taiwanese and other companies are now accelerating their exit from China. On July 23rd, Japan's Nippon Steel announced that it would end its 20-year joint venture with China's Baosteel. The contract will expire at the end of August. Nippon Steel has found it difficult to expand its business in China and plans to shift investment to India and the United States. Nippon Steel also stated that it plans to sell all of its shares in the joint venture with China's Baosteel for $241 million, though the sale will require regulatory approval. During the joint venture, Nippon Steel sued China's Baosteel in a Japanese court in 2021, accusing the Chinese side of stealing Japanese patents on electroplated steel sheets, which China supplies to Toyota for electric vehicles. The case is still ongoing. This is a typical example of foreign companies rushing to withdraw from China. On July 12th, Japanese construction machinery manufacturer Kato Works announced the dissolution and liquidation of its subsidiary that produces and sells hydraulic excavators in Kunshan, Jiangsu. Construction machinery company Kato Nakajima also announced that it would liquidate in August to exit the Chinese market. This trend is spreading from the manufacturing sector to the beauty products sector, with high-end skincare brands such as Shiseido also announcing their withdrawal from the Chinese market. Shiseido's flagship stores in China have recently stopped accepting new orders and have begun to close. Another Japanese company, Bridgestone, has also announced its withdrawal after more than 20 years of operations in China. Bridgestone has ceased producing and selling commercial tires in China and will likely focus on high-performance passenger tires. According to public information, in the past year, most of the globally renowned companies leaving China have been Japanese. These include manufacturing plants of Canon, Sony, Toshiba, and Nikon. Other companies that have exited China include Amazon, LinkedIn, and the R&D center of Astellas Pharmaceuticals. These companies have moved their supply chains to Thailand, the Philippines, or back home. Taiwanese companies face threats from China and seek refuge in other ways. Faced with threats from the Beijing government, Taiwanese companies are now seeking refuge in various ways. French media have expressed concern that China's hegemonic ambitions toward Taiwan have made Taiwan's leading technology companies worry about the worst-case scenarios. As a result, some companies are considering setting up a second headquarters outside Taiwan. Les Echos, which focuses on the response of Taiwanese companies seeking refuge abroad in the face of threats from Beijing, pointed out that since 2022, China has intensified its military demonstrations against Taiwan under the pretext of then-U.S. House Speaker Nancy Pelosi's visit to Taiwan, reiterating its claim to the ancestral territory. This escalation of tensions has alarmed Taiwan's leading technology companies, prompting them to consider a plan B away from the island. At the heart of these concerns are giants in the fields of electronic components, IT infrastructure, and medical technology, which are actively preparing for the evacuation of some employees from their headquarters. Taiwanese companies have long outsourced a large part of their production. Foxconn, the world's leading computer equipment manufacturer and a subcontractor for Apple, Amazon, and Microsoft, focuses most of its business in China but also operates in Europe, Brazil, and Mexico. TSMC, a semiconductor giant that manufactures for companies such as NVIDIA and Apple, has just announced the construction of a second factory in Arizona, USA, with an investment of more than $65 billion, including $6.6 billion in subsidies from the U.S. government. Singapore and the Netherlands are priority locations for Taiwan's semiconductor IC industry to expand its factories. Although a military invasion of the island of Taiwan by Chinese armed forces does not seem imminent, such concerns are still growing. An armed confrontation in the Taiwan Strait would have a catastrophic impact on the global economy, especially for the global semiconductor market, which is already tense due to the of artificial intelligence. The trend of foreign capital withdrawal from China has been a hot topic since 2023. Earlier this year, global asset management firm Knight Frank analyzed that this trend is still ongoing. To calm public opinion, China's Ministry of Commerce stated that the inflow and outflow of foreign capital are in line with market rules and that the narrative of foreign companies fleeing has been exaggerated and incited by external forces. Xinhua News Agency, the media outlet of the Chinese Communist Party, even criticized foreign companies for being foolish. Xinhua propaganda asserted that the best investment opportunities in the future still lie in China and that leaving China would only mean missing out on these opportunities. A commentator noted that the deteriorating business environment in China is driving foreign capital to leave, with many foreign companies moving to Southeast Asia, India, and even returning to their home countries, such as the United States, Japan, and South Korea. These companies come to China to do business and make money, not to engage in charity work. A netizen named Trinh Thai Roess suggested that foreign companies are reluctant to leave China because of its well-established supply chain and cheap labor force. However, in the past three to five years, not only have the remaining 100 Japanese companies left, but also other companies from Taiwan, Korea, the US, Germany, the UK, and even some Chinese enterprises have withdrawn from China. Japanese camera giant Nikon shut down its subsidiary Nikon Imaging in China. The world's largest hard drive maker Seagate closed its factory in Suzhou. Suzuki withdrew all shares from two subsidiaries in China. Nitto Denko Group closed its Suzhou factory and withdrew from China. Apple assemblers plan to move production lines to Taiwan or Southeast Asia. In 2019, South Korea's Samsung Electronics closed its factory in Huizhou, ending phone production in China and shifting to India, Vietnam, and other Southeast Asian countries. Japanese office equipment company Ricoh moved its photocopier production lines to Thailand. KF sold its China business to SNH. In 2020, British supermarket chain Tesco announced that it would completely withdraw from the Chinese market. Dutch company Philips sold its home appliance business to Hill House Capital and exited the home appliance market in China. American clothing retailer Old Navy announced its withdrawal from the Chinese market and closed all its physical and online stores in the country. In 2021, Yahoo stopped providing products and services in China. Toshiba closed its last factory in Dalian. Japanese electronics manufacturer Oki ceased its printer and copier manufacturing operations in China. In 2022, Canon closed its factory in Zhuhai, moving production lines to Japan. South Korea's Lotte Group closed its last department store in China, dissolved its headquarters in China, and increased investment in Southeast Asia. Apple announced that iPhones would be assembled and manufactured in an Indian factory. In 2023, Sony moved its main factory to Thailand. Citibank left China. Supermarket group Carrefour left China. U.S. asset management giant Vanguard and performance consulting firm Gallup announced they would close their operations in China and leave the country. China makes its own 8nm DUV lithography machine, claims refuted. Recently, claims have circulated widely on Chinese mainland social media that China has successfully developed its own 8nm DUV lithography machine and mastered 7nm lithography technology. However, these claims have been refuted by industry insiders. In early September, the Ministry of Industry and Information Technology of the Communist Party of China announced the Guidelines for the Promotion and Application of the First Major Technical Equipment, 2024 edition. The core technical indicators of a DUV lithography machine listed in the guidelines show a resolution of less than or equal to 65nm and an overlay accuracy of less than or equal to 8nm. Following this, claims began circulating online that China had made a major technological breakthrough and could produce chips at 8nm and below. Additionally, some netizens, citing foreign media reports that Shanghai Microelectronics had applied for a series of EUV technology patents in China, deduced that the country had mastered the key technologies needed to manufacture 7nm and below chips. For a time, patriotism sentiments rapidly spread across online communities. However, professionals view these claims as a farce. Core intelligence quoted experts who pointed out that the technical parameters announced by the ministry show the resolution of the listed argon fluoride lithography machine is less than or equal to 65nm with an overlay accuracy of less than or equal to 8nm. While this represents an improvement compared to Shanghai Microelectronics' previous SSA600 lithography machine, which had a resolution of 90nm, it is still not at the level needed for 28nm chips, let alone 8nm chips. Technically speaking, a resolution of 65nm means the process node achievable by a single lithography process is about 65nm, while overlay less than or equal to 8nm refers only to overlay accuracy. This does not indicate that the lithography technology can produce 8nm chips. A report by tech media WCCF Tech stated bluntly that the core indicators of China's newly announced domestic DUV exposure machine suggest that China's lithography technology is at least 15 years behind the United States. By 2009, customers of Dutch semiconductor equipment company ASML were already producing chips at this level using their ARF lithography machines. Additionally, a report by Deutsche Welle mentioned that Shanghai Microelectronics had applied for a series of EUV technology patents in China. Last year, Huawei's flagship Mate 60 Pro claimed to feature 7nm chips produced by SMIC, leading some of China's online communities to firmly believe that Chinese semiconductor companies like Shanghai Microelectronics had mastered the key capabilities for manufacturing 7nm and below chips. However, Taiwanese media noted that while many on Chinese social platforms celebrated China's major breakthrough in chip technology, neither the official media nor relevant manufacturers have publicly confirmed these claims or released any evidence of actual applications.