Japan’s Photoresist Export Ban: A Semiconductor Supply Chain Crisis That Could Reshape the Industry
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The semiconductor industry woke up to potentially seismic news on December 1st, 2024. According to industry reports, Japan appears to have quietly implemented a comprehensive ban on photoresist exports to China, effective from mid-December. While neither the Japanese government nor the companies involved have made official announcements, industry insiders on both sides are treating this as a fait accompli. What makes this particularly striking is the surgical precision of the reported measures – targeting specific companies including Canon, Nikon, and Mitsubishi Chemical by name.
To understand why this matters so much, you need to grasp just how critical photoresist is to semiconductor manufacturing. This light-sensitive chemical material is essentially the “ink” that allows chipmakers to draw incredibly precise circuit patterns on silicon wafers. When light hits photoresist, its chemical properties change, enabling the intricate lithography process that creates the microscopic transistors powering everything from smartphones to data centers. Without photoresist, modern chip manufacturing simply stops.
The numbers tell the story of Japan’s overwhelming dominance in this market. Japanese companies control an astounding 95% of global photoresist supply when combined with a few Western players. Japan Synthetic Rubber (JSR), Shin-Etsu Chemical, Tokyo Ohka Kogyo, and Sumitomo Chemical don’t just lead the market – they essentially are the market. For the most advanced EUV photoresists used in cutting-edge 3-7 nanometer chips, these three Japanese companies hold a complete monopoly. In KrF photoresists, the Japanese big four plus DuPont control 95% of global supply. Even in older I-line and G-line photoresists, Japanese companies maintain an 88% market share alongside DuPont and South Korea’s Dongjin Semichem.
This isn’t Japan’s first rodeo using photoresist as a geopolitical weapon. In 2019, when tensions with South Korea escalated over wartime labor disputes, Japan’s initial semiconductor sanctions targeted photoresist exports. The precedent was clear: when Japan wants to pressure another country’s tech industry, photoresist restrictions are the go-to tool. The material’s criticality combined with Japan’s near-monopoly creates an almost perfect leverage point.
Market Reaction and Chinese Response
Interestingly, Chinese stock markets reacted with what can only be described as enthusiasm to the export ban news. The photoresist concept index surged over 2% by market close on December 2nd, with 57 stocks in the sector posting gains. Companies like Huarong Chemical and Guofeng New Materials hit daily trading limits, while Rongda Photosensitive, Nanda Optoelectronics, Tongcheng New Materials, Hengkun New Materials, and Eight Billion Space all posted significant gains.
This seemingly counterintuitive market response reflects two key dynamics. First, investors are betting heavily on domestic substitution opportunities – the idea that Chinese companies will finally get the market opening they need to compete with Japanese incumbents. Second, there’s genuine technical progress happening in China’s photoresist industry that’s been building momentum independent of this latest development.
Rongda Photosensitive, for instance, announced that some of its photoresist products have achieved performance parity with Japanese alternatives and are already in volume production at several customers. The company’s KrF (248nm) photoresist project has completed installation of core lithography equipment and is actively developing related products. Hengkun New Materials, which just went public, has achieved small-batch sales of ArF photoresist while its SiARC and TopCoating materials plus silicon-based and metal-based precursor materials have entered customer validation phases.
Eight Billion Space represents perhaps the most concrete progress, with its hundred-ton-scale semiconductor KrF photoresist resin production line already achieving volume production. The company has successfully entered the supply chains of SMIC and Hua Hong Group, two of China’s largest foundries. Beijing Kehua has achieved volume production and sales of both KrF and ArF photoresists, becoming a supplier to SMIC, Yangtze Memory Technologies, and other major domestic fabs. Additional players like Nanda Optoelectronics, Tongcheng New Materials, Jingri Electronic Materials, and Huamao Technology have achieved varying degrees of volume production across different photoresist categories including ArF, KrF, i-line, and g-line products.
The Raw Materials Vulnerability
However, the situation isn’t as straightforward as Chinese companies simply ramping up production to replace Japanese suppliers. The photoresist supply chain runs much deeper than final product assembly. Each company sources raw materials from different suppliers, and many remain dependent on Japanese-supplied resins, monomers, photoinitiators, and other critical components. Even if Chinese companies can formulate competitive photoresists, they may still face supply constraints on essential raw materials.
The anti-reflective coating materials that work alongside photoresists are similarly dominated by JSR, Shin-Etsu Chemical, DuPont, Merck, and Nissan Chemical. The specialized resins, monomers, and photoinitiators that form photoresist’s chemical foundation are primarily supplied by Japanese, American, and European companies. This creates a multi-layered dependency that can’t be resolved overnight, even with significant investment and political will.
But China holds some cards of its own in this complex game. Japan’s semiconductor materials industry, including photoresist production, depends heavily on rare earth elements like dysprosium and terbium – and 90% of these critical materials are imported from China. This creates a potential counter-leverage scenario where China could restrict rare earth exports to Japan’s semiconductor materials industry. Additionally, China represents Japan’s most important semiconductor market and is the world’s largest chip consumption market overall, giving it significant economic leverage.
The financial implications are substantial. The global photoresist market was valued at approximately $2.1 billion in 2023 and is projected to reach $3.2 billion by 2028, driven primarily by advanced node chip production and increasing semiconductor demand. Japanese companies have historically captured the lion’s share of this high-margin business, with JSR alone reporting photoresist-related revenues of over $800 million annually. A successful Chinese substitution effort could redistribute billions in annual revenue while potentially lowering global photoresist prices through increased competition.
From a technical perspective, the challenge facing Chinese companies varies significantly across photoresist categories. Older i-line and g-line photoresists used for mature node production (above 65 nanometers) are relatively easier to replicate, and several Chinese companies have already achieved commercial success in these areas. KrF photoresists for 130-250 nanometer processes represent a moderate technical challenge, while ArF photoresists for 40-130 nanometer production require more sophisticated chemistry and manufacturing precision.
The real technical mountain to climb is EUV photoresist for sub-10 nanometer processes. These materials must maintain chemical stability under extreme ultraviolet radiation while providing the resolution needed for the industry’s most advanced chips. The chemistry is extraordinarily complex, involving specialized polymer platforms, photoacid generators, and quencher systems that took Japanese companies decades to perfect. Even with significant investment, developing competitive EUV photoresists could take Chinese companies 3-5 years or more.
This timeline creates interesting strategic dynamics. If the export restrictions persist, Chinese foundries and memory manufacturers may need to adjust their technology roadmaps, potentially focusing more heavily on mature and specialty processes where domestic photoresist alternatives are more readily available. This could accelerate China’s push into automotive semiconductors, industrial chips, and other applications that don’t require the most advanced nodes.
The geopolitical implications extend beyond just China and Japan. South Korean companies like SK Hynix and Samsung, which rely on both Japanese photoresists and Chinese manufacturing, could find themselves caught in the middle of this supply chain disruption. European and American chip companies with operations in China face similar challenges. This fragmentation of the global semiconductor supply chain could ultimately drive more regionalized production and supply networks.
Looking ahead, this photoresist export restriction could prove to be a watershed moment for the global semiconductor industry. If Chinese companies successfully develop competitive alternatives across the full photoresist spectrum, it would break one of Japan’s most important technological monopolies and fundamentally reshape semiconductor supply chains. The combination of market opportunity, government support, and necessity-driven innovation could accelerate Chinese photoresist development far beyond what would have occurred under normal competitive conditions.
The success or failure of this forced localization effort will likely be determined over the next 2-3 years. Chinese companies have the financial resources, government backing, and market access needed to mount a serious challenge to Japanese dominance. Whether they can execute the complex chemistry and manufacturing processes required remains to be seen. But if history is any guide, underestimating China’s ability to develop domestic alternatives to critical technologies has proven to be a costly mistake. The semiconductor industry may be about to learn this lesson once again, this time in the specialized but crucial world of photoresist manufacturing.
This post was written after reading 日本光刻胶，全面断供？ . I’ve added my own analysis and perspective.
Disclaimer: This blog is not a news outlet. The content represents the author’s personal views. Investment decisions are the sole responsibility of the investor, and we assume no liability for any losses incurred based on this content.
