The US wants the Netherlands to exclude more Chinese companies from using ASML machines

The US wants the Netherlands to exclude more Chinese companies from using ASML machines

The U.S. government wants the Netherlands and Japan to do more to prevent chip technology manufactured in the West from falling into Chinese hands. America has added 11 companies to a list that companies like ASML cannot supply.

US President Joe Biden’s administration has long pressured allies not to supply advanced chip technology to Chinese companies. Export restrictions are already in place on ASML’s most advanced equipment. This denies China access to extreme ultraviolet lithography (EUV) technology, which enables the production of the most complex microchips. The current ‘blacklist of five companies has now been expanded with 11 more Chinese tech firms.

Through these restrictions, the USA hopes to curb China’s technological rise, partly out of concerns about using semiconductors in its military arsenal. It’s not just about state-of-the-art EUV machines, either: even the supply of ‘old-fashioned’ DUV equipment was drastically restricted earlier this year. Shortly before that, ASML cancelled three other deliveries under U.S. pressure as well.

Freeze on maintenance

ASML’s systems use American parts and components, which is why the US believes it can enforce such restrictions. The country even urged a maintenance freeze on ASML machines in China. Because the machines are so complex, they do not work correctly without being set up by experts from ASML.

A ban on maintenance and setup of the equipment would make it more difficult for China to use the machines, much later or not at all. In doing so, the Americans would jeopardize ongoing contracts ASML has with the Chinese companies.

Tip: ASML faces uncertain 2024 with export restrictions and transition period

However, according to Reuters, ASML servicing contracts are still in place, no doubt very much against America’s wishes. The Dutch government claims it does not have the extraterritorial scope to cut them off. While the U.S. can prevent ASML equipment from getting into the hands of China simply by keeping American-made components at home, maintenance is much harder to control. In addition, it would be another financial drain on ASML. It is already largely unable to trade with China, the company’s largest market behind Taiwan.

Export bans and restrictions

Japan already agreed last year to an export ban on 23 types of equipment to China. In 2022, the U.S. first introduced such restrictions on companies on its own soil, including Nvidia. As a result, it has become more difficult for Chinese semiconductor manufacturers to acquire essential equipment such as lithography tools necessary for chip manufacturing and high-performance chips for AI purposes. Western countries also bar 5G equipment and other hardware from Huawei for security reasons.

Despite all the restrictions, China partially manages to produce advanced chips. Chinese President Xi Jinping earlier informed outgoing Dutch Prime Minister Mark Rutte that China will not let scientific or technological obstacles raised by other countries stop its technological advance.

In response to Washington’s restrictions, China determined that municipalities, ministries, and other government agencies in the country would no longer be allowed to use Windows computers or chips from Intel and AMD.

Also read: China’s Xi Jinping to Dutch prime minister: ‘Export restrictions won’t stop us’