Japan and the Netherlands are ready to join the United States in restricting China's access to advanced semiconductor equipment, creating a powerful alliance that would undermine Beijing's ambitions to build its own domestic chipmaking capacity, Bloomberg reported, citing sources.

Officials from the U.S., the Netherlands and Japan are set to conclude talks Friday on a new set of restrictions on what can be supplied to Chinese companies, the sources said. Negotiations were ongoing as of Thursday evening in Washington.

The Netherlands would expand restrictions on ASML Holding NV that would prevent it from selling at least some of its equipment for so-called deep ultraviolet lithography, which is crucial to producing certain types of advanced chips and without which attempts to set up production lines may not be possible. Japan will impose similar restrictions on Nikon Corp.

The joint effort extends restrictions that the Biden administration unveiled in October that were aimed at limiting China's ability to produce its own advanced semiconductors or buy advanced chips from abroad that could help military and artificial intelligence capabilities. The three countries are home to major chipmakers, including ASML, Japan's Tokyo Electron Ltd. and U.S. Applied Materials Inc.

U.S. manufacturers complained that unilateral actions by the Biden administration allowed foreign competitors to continue operating in one of their biggest markets.

Shares of Tokyo Electron, which sold chip-making equipment to China, lost profits and fell about 1 percent after the Bloomberg report.

Chinese chipmakers also fell. Shanghai-based Semiconductor Manufacturing International Corp. extended its decline to 2.1%, and shares of Hua Hong Semiconductor Ltd. fell 1.5%.

In addition, China's offshore yuan reversed earlier gains against the dollar, weakening 0.1% to 6.7448. The currency rose to its strongest level in two weeks on signs of a rebound in tourism and consumption during the lunar New Year holiday.

China has fought back against U.S. efforts. In December, Beijing filed a complaint with the World Trade Organization seeking to overturn U.S.-imposed export controls.

Even ASML's chief executive warned that the U.S. campaign could have unintended consequences. On Jan. 25, CEO Peter Wennink said the U.S.-imposed export controls against China could end up pushing Beijing to successfully develop its own technology in advanced chipmaking equipment.