Copyright © BusinessAMBE 2023

Dutch company ASML was no longer allowed to supply some of its chip machines to China, despite a previously issued license. The company was given a partial ban by the Dutch government. According to news agency Bloomberg, the United States is stepping up the pressure.

In the news: Bloomberg reports that the U.S. government requested ASML not to make certain deliveries of chip machines to China. The Dutch government came up with a partial ban.

  • ASML Holding NV had a license until the end of 2023 to export three deep ultraviolet (DUV) machines to China. Those machines can be used to develop chips. The DUV machines print ultrafine lines on chips using lithography techniques, laying the foundation for chip development.
  • Despite the license, the U.S. government asked the Dutch company not to export the three machines. The U.S. remains concerned about such technology in Chinese hands.
  • According to Bloomberg US security adviser Jake Sullivan reportedly contacted his Dutch counterparts last year to urge caution. The Dutch advised Sullivan to contact ASML directly.
  • They did. According to ASML, the company "has received further clarification on the scope and impact of U.S. export control regulations in recent discussions with the U.S. government," it writes on its website.
    • The U.S. is imposing restrictions on supplies to "a limited number of advanced manufacturing facilities" as of mid-October, ASML said.
    • It acceded to the U.S. requirement, and an unknown number of machines were not exported.
    • According to the company, the decision not to export the machines has no impact on its 2023 financial expectations.

License withdrawn early

Zoomed in: The Dutch government imposed a partial export ban.

  • The license ASML held will not be extended further. The Dutch government intervened, imposing a partial export ban on the company to China at the end of 2023.
  • A slight blow to the company: exports to China grew exponentially in 2023 compared to 2022. In the third quarter of 2023, China accounted for nearly half of all ASML's exports, compared to 24 percent in the same quarter in 2022.
  • ASML CEO Peter Wennink said the new export rules will cause 15 percent less sales in China.
  • The company is currently the global leader in DUV machine development.

Concerns about China's military applications

Zoomed out: U.S. concerns about China's chip technology are growing.

  • This is not the first time the US has been concerned about the technology ASML provides. Back in 2019, the Trump administration began contacting the Dutch government about DUV machines.
  • This policy was continued by the Biden administration, and continued US pressure is said to have led to the partial revocation of the license by the Dutch government, Bloomberg writes.
  • Powerful DUV technology can be used to develop semiconductors, chips that can also be used for military purposes. Hence, the U.S. is urging caution. The country wants to prevent Western technologies from underpinning Chinese military development.
  • Wennink previously disagreed with that strategy: "The more you pressure China, the more likely it will redouble efforts to develop competitive technology," Bloomberg noted.
  • The news agency also reports that it expects China will now hoard DUV machines in response to the tightened rules.
    • Chinese figures would already show that imports of DUV technology increased fivefold between July and November 2023, totaling $3.7 billion, or about 3.25 billion euros.

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