China has warned it will retaliate economically against Japan if the country continues to restrict sales and servicing of chipmaking equipment to Chinese companies.

According to a report from Bloomberg, Toyota Motor has been privately told by senior Chinese officials that China could block Japan’s access to minerals necessary for automotive production.

Toyota is the world’s largest automotive manufacturer and has invested in the second TSMC chip fab in Kumamoto, Japan, due to be operational by the end of 2027.

At the start of 2023, it was reported that Japan, alongside the Netherlands, had agreed to comply with a number of US-led restrictions relating to the exportation of high-tech chipmaking technology to China.

In April of the following year, the Japanese government announced plans to expand export restrictions on 23 types of semiconductor manufacturing equipment, with impacted technologies including scanning electron microscopes and gate-all-around transistors.

However, favored trading partners of Japan, including South Korea, Singapore, and Taiwan, will not be exempt from the new rules.

Chinese export controls on semiconductor materials are already causing supply chain issues with Western manufacturers, with a recent report showing that the price of gallium and germanium in Europe has nearly doubled in the past 12 months. According to the US Geological Survey, China produces 98 percent of the world’s supply of gallium and 60 percent of germanium.