The Dutch government has revoked export licenses for ASML Holding NV, preventing the leading semiconductor equipment supplier from shipping advanced lithography machines to China. This move escalates tensions in the ongoing technology war between China and the West.
Background
ASML is the world’s only maker of extreme ultraviolet (EUV) lithography machines – highly specialized equipment vital for producing advanced logic chips. Over 90% of semiconductors today are made using ASML’s semiconductor manufacturing machines.
For years, the US government has been urging the Dutch government to ban exports of ASML’s most advanced machines to China. These machines, which cost up to $150 million each, are crucial for China’s goal of building a world-leading domestic chip industry.
According to inside sources, US officials intensified pressure on their Dutch counterparts in recent weeks to halt the shipments before a key deadline. This deadline relates to new export restrictions coming into effect this month which will ban shipments of chipmaking equipment using US technology to China.
Revocation of Export Licenses
On January 1st, 2024, ASML disclosed that it had received formal notification from the Dutch government about the revocation of its export licenses needed to ship its flagship DUV lithography machines to customers in China.
ASML stated: “We have been informed that the Dutch government intends to withhold the licenses required for particular shipments that were slated to go to China in 2023 and 2024.”
The company added that they will likely now be unable to meet some of its 2023 and 2024 revenue guidance due to these canceled shipments.
| Lost Revenue from Canceled China Shipments | |
|---|---|
| 2023 | €2 billion |
| 2024 | €1 billion |
While the ban initially only affects exports of ASML’s DUV systems, there are also concerns that EUV system exports to China could be next in line. Losing access to EUV lithography would be devastating for China’s ambitions of achieving self-reliance in advanced logic chip production.
Response from China
China reacted angrily to the news, with its foreign ministry spokesperson stating: “We urge the Dutch government to heed the voice of the business community, maintain an open, fair and non-discriminatory business environment, and do things conducive to mutual trust and cooperation between enterprises.”
This is the latest move in an ongoing tit-for-tat technology war between China and the US which threatens to bifurcate the global semiconductor supply chain.
Over the past few years, the US has imposed various sanctions and export controls to slow down China’s technological progress, especially in areas like artificial intelligence and advanced chipmaking.
Impact on the Semiconductor Industry
ASML’s inability to ship advanced chipmaking equipment worth several billion euros over 2023 and 2024 could disrupt the semiconductor supply chain.
The ban will weaken China’s domestic logic chip capabilities. Currently, Chinese chipmakers still rely heavily on importing lithography equipment from ASML for leading-edge chip production.
Losing access to this vital equipment will set back China’s goals in fields like AI, 5G, and supercomputing where advanced logic chips are essential.
The ripple effects may impact semiconductor equipment manufacturers in the US, Japan, and other countries who supply key components and services to ASML for its advanced lithography systems. For example, ASML uses light sources from American companies Cymer and Carl Zeiss for its EUV lithography machines.
Reduced demand and lower revenue guidance from ASML could dampen growth forecasts for these equipment and component suppliers too.
Outlook Going Forward
It seems likely that the US administration will continue pushing its allies to cut China off from critical semiconductor technology access.
Japan and South Korea also produce advanced semiconductor manufacturing equipment and chemicals vital to chip production in China. We will probably see intensifying diplomatic pressure on these governments to get on board with broader US sanctions.
In response, China will double down efforts to develop domestic alternatives and reduce reliance on foreign technology. Last year, China earmarked $143 billion to boost its domestic semiconductor capabilities. Accelerating R&D and production around lithography and other advanced semiconductor equipment could become top priorities.
Unfortunately, the fallout from these growing technology sanctions will likely bifurcate the global semiconductor supply chain. Instead of collaboration across borders that has traditionally benefited the tech industry worldwide, we might see two separate supply chains emerge – one centered around the US and its allies, the other around China. This could drive up costs and dampen innovation across the sector.
The next few years will be pivotal in deciding whether chip technology cooperation can be maintained or not in an era of geopolitical tension between global superpowers.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
