Japan Chip Exports to China Surge 48% as Bilateral Trade Rebounds

Japan’s integrated circuit exports to China surged nearly 48% in 2025, helping drive a rebound in bilateral trade even as geopolitical tensions intensified and shipments of semiconductor manufacturing equipment declined, according to a new white paper released by the Japanese Chamber of Commerce and Industry in China (JCCIC).

Bilateral trade between Japan and China rose 6.2% to $343.3 billion in 2025, ending three consecutive years of decline, as Caixin Global reported, citing the JCCIC’s 2026 White Paper on the Chinese Economy and Japanese Enterprises.

Chip Exports Hit Record Highs

Japan’s integrated circuit (IC) exports to China reached $28.7 billion in 2025, a 47.9% year-on-year increase, accounting for 17.4% of Japan’s total exports to the country. The surge was driven primarily by AI-related demand, which lifted sales and prices of components such as multi-layer ceramic capacitors (MLCCs) and NAND flash memory chips, according to Wang Xiaolong, director of semiconductor research firm ICwise.

The global memory chip market experienced a sharp reversal in 2025, moving from oversupply early in the year to severe shortages and soaring prices by the third quarter, research firm Omdia noted.

Divergent Trends in Equipment vs. Chips

In a striking contrast, Japan’s semiconductor manufacturing equipment exports to China fell 2.3% to $14 billion, reflecting the ongoing impact of export controls. Since 2022, Japan has aligned with US-led efforts to restrict China’s access to advanced chipmaking equipment, announcing controls on 23 semiconductor-related items in 2023.

This divergence highlights the targeted nature of the restrictions: Japan limits advanced chipmaking equipment but not the finished chips themselves. Major global chipmakers including TSMC, Samsung Electronics, SK Hynix, and Micron Technology experienced heavy AI-related demand in 2025, leading Japanese equipment suppliers to prioritize these large global customers over Chinese buyers.

Japanese Business Confidence Remains Strong

Despite the challenging geopolitical environment, approximately 85% of Japanese-funded enterprises in China plan to maintain or expand their operations, according to the JCCIC white paper, which gathered input from 8,102 Japanese-funded enterprises and contains 572 recommendations across 27 chapters.

Tetsuro Homma, President of the JCCIC and Executive Vice President of Panasonic Holdings Corp., said at the white paper’s release in Beijing on June 11 that the findings demonstrate “the firm determination of the vast majority of Japanese companies to deeply cultivate the Chinese market,” as Global Times reported.

Homma noted that Japanese companies have more than 70,000 overseas branches worldwide, of which 30,000 are located in China. “China, for Japanese companies, is no longer just a huge consumer market, but also a vital manufacturing base and a hub of innovation,” he said.

Rising Competition from Chinese Firms

However, competition is intensifying. A Japan External Trade Organization (JETRO) survey of 791 firms found that 74.5% of Japanese companies operating in China now identify Chinese companies as their main competitors, prompting price cuts and cost control measures.

Geopolitical Tensions and Rare Earth Vulnerabilities

Bilateral relations remain strained on multiple fronts. In February 2025, China banned exports of dual-use items to 20 Japanese defense-related entities and added 20 other Japanese companies to an export watchlist, citing Japan’s “remilitarization.” Japanese Prime Minister Sanae Takaichi’s November 2025 parliamentary remarks suggesting Japan could respond militarily to an attack on Taiwan further complicated relations.

Homma acknowledged that some Japanese companies have faced difficulties obtaining export licenses for rare-earth items from China, as Mainichi/Kyodo News reported. “Unfortunately, we have received reports from some companies that they could not smoothly obtain export licenses for rare-earth items,” he said.

China dominates global rare earth production, which is essential for manufacturing high-tech products from electric vehicles to weapons, creating a strategic vulnerability for Japanese manufacturers.

Key Corporate Exposure

Major Japanese companies remain heavily exposed to the Chinese market. Renesas Electronics Corp. generated approximately 30% of its total revenue from China in 2025, with China revenue rising 9%. Murata Manufacturing Co. reported that 47.2% of its revenue came from Greater China in the fiscal year ending March 2026, with Chinese automakers accounting for more than half of those sales.

Analysis and Outlook

The 47.9% surge in chip exports alongside the broader trade rebound demonstrates the deep economic interdependence between Japan and China, suggesting that decoupling efforts face significant structural barriers. The AI boom has emerged as a powerful force reshaping semiconductor trade dynamics, strong enough to overcome headwinds from export controls and geopolitical friction.

China’s exports to Japan reached $165 billion in 2025, while Japan’s exports to China were approximately $145 billion, giving China a trade surplus, according to China Data Portal. Japan remains China’s fourth-largest trading partner.

Looking ahead, key questions remain: whether the chip export surge can sustain if AI demand moderates, how Japan will balance its alliance with the US against its economic interests in China, and whether Chinese firms will continue to gain competitive ground against their Japanese counterparts.