The Dutch government is reportedly planning to further restrict the export of chip manufacturing equipment by ASML to China, according to sources cited by Bloomberg. It is said that by the end of the year, China may no longer have access to maintenance services and spare parts for the second-generation advanced chip equipment.
Insiders revealed that the government led by Dutch Prime Minister Dick Schoof may not renew certain licenses for ASML to provide services and parts in China, with these licenses set to expire by the end of this year. The decision is expected to affect the company’s top-tier deep ultraviolet lithography machines.
When asked about this news by the largest Dutch news agency ANP, ASML declined to comment. The Dutch Ministry of Foreign Affairs and Development Cooperation also refrained from making any statements.
If ASML fails to provide maintenance services, the deep ultraviolet lithography machines may cease functioning after a period of time. According to Bloomberg, the United States is pressuring the Netherlands and other key allies in the chip industry to further restrict advanced technology exports to China.
A senior official from the Biden administration stated that the US government will ban the sale of products containing US technology through unilateral measures, including the Foreign Direct Product Rule (FDPR). This regulation also applies to ASML’s equipment.
For national security reasons, the US has long restricted Beijing’s access to cutting-edge chip technology. ASML has never been allowed to sell its latest extreme ultraviolet (EUV) chip manufacturing equipment to China. Last year, the Dutch government also imposed export restrictions on certain second-generation DUV advanced chip manufacturing machines from the company.
Shortly after the report by Bloomberg, the stock price of ASML at the Amsterdam stock exchange retraced some of its gains, but still remained about 2.8% higher on Thursday, August 29.
This development could be a significant setback for Beijing’s efforts to develop a world-class chip industry.
The chip manufacturing equipment developed by ASML in Veldhoven, the Netherlands, is the most advanced in the industry and comes with maintenance agreements critical for equipment operation. Withdrawal of maintenance services may render at least some equipment in China inoperable as early as next year.
The new Dutch government led by former intelligence chief Schoof has signaled a cautious stance towards China. In an interview with Bloomberg earlier this month, he emphasized the need for “particular caution” in discussions with Beijing on national security issues.
When asked whether the Dutch government would consider new export control measures this year, Schoof mentioned that the government is actively negotiating with the US and Japan and expects satisfactory outcomes from these talks.
In the interest of national security, the Biden administration has implemented comprehensive export controls on China to curb the development of the Chinese semiconductor industry and prevent its military application. ASML’s US counterparts, including Applied Materials Inc., have faced similar restrictions. Earlier this year, the US urged the Dutch government to tighten controls on ASML’s business in China.
China relies on ASML’s immersion DUV lithography system to advance its chip manufacturing technology. Furthermore, China has been unable to acquire ASML’s most advanced EUV (extreme ultraviolet) lithography machines.
Without ASML’s DUV equipment, Huawei and its partner SMIC will find it increasingly difficult to make advancements within their current capabilities. Their technology is already lagging behind industry leader TSMC by two generations.