As the economic friction between the US and China becomes long term, the gas welding materials market has seen a large drop in exports of welding robots to China, reports The Gas Review.

The value for April through September was down 35.8% to ¥30bn, according to the Japan Robot Association, clearly reflecting the impact of current US-China trade problems.

Welding robots were not the only China-bound products to take a hit. Ordered amount of exports to China of machine tools for April through September were down 47.4% to ¥44bn, according to the Japanese Machine Tools Builders’ Association.

As for shipment value of export to China in September, exports of hydraulic breaker crushers suddenly dropped 24.6%, according to the Japan Construction Equipment Manufacturers Association.

It is thought that these trends will continue for the time being, creating a serious condition for companies for which exports to China represent a high share of their business.

Further, these areas are vital to the gas welding materials market, and the impact has already been felt.

All of this has been caused by a critical slump in the Chinese economy. Ever since the US announced tariffs of 25% on Chinese goods, stock market prices and real estate values have dropped and domestic demand has fallen off.

For example, sales of automobiles in China for January through September dropped 10.3% to ¥18.4m.

Foreign currency is also in short supply, resulting in interruption of some scheduled infrastructure construction plans, such as for railways.

Foreign currency, either yen or US dollars, are necessary for China to buy Japanese welding robots, machine tools and construction equipment.

The Chinese yuan is not an international currency. There has also been a rapid increase in movements by European, American and Japanese manufacturing companies to switch new plant sites from China to other countries.

Thoese companies are deciding that there is no merit in having plants in china if tariffs of 25% will be added to anything exported to the US.

These tariffs are part of President Trump’s re-election measures, so the likelihood that they will exist for some time was also factored into the equation.

The US-China trade frictions are also directly impacting the possibility of achieving the industrial target given at the beginning of the key Made in China 2025 government policy to develop global cutting-edge next generation information technology (semiconductors and 5G next generation communications standard).

The US government has prohibited exporting semiconductor manufacturing equipment to China, preventing China from buying state-of-the-art equipment from two US companies – Applied Materials and Lam Research.

The top exposure equipment company, ASML, is following suit by not exporting to China. China is not capable of producing any of this equipment alone.

Although trade imbalance and data breaches are given by the US government as the main problems, some people believe that the largest factor is an attempt to slow down 5G development.

In addition to manufacturing equipment, Japan has a high share in semiconductor materials, such as silicon wafers, resists, specialty gases, gas-related equipment, and more.

Although there is no trade friction per se between China and Japan, the main users of gas supply equipment are Applied Materials ad Lam Research, so impact on Japan from the US prohibition of exports to China is unavoidable.

So what about Japanese products? Demand for Japanese materials for semiconductors and LCDs remains strong in China. However, there are also trade problems between Japan and the US.

The trade balance with the US clearly shows that Japan exports much more than it imports. It is yet unclear on whether this imbalance will impact the market for semiconductor-related gases and equipment exported to China.