In the confrontation between the West and China, the battle for high-end chips has become a key focus. Recently, the Dutch government announced that it may not renew equipment maintenance permits for the Chinese market giant ASML, a leading manufacturer of lithography machines. On the other hand, China has imposed export controls on crucial semiconductor materials such as germanium, gallium, and antimony, and has threatened to restrict chip-related supplies from Japan, which are essential for automotive production.
Experts believe that a new round of chip warfare is escalating, with competition between the US and China extending beyond just the economic realm, potentially expanding into military, diplomatic, and global governance arenas.
The Dutch government, in response to US requests, has indicated that it will impose further restrictions on ASML’s after-sales services for its Chinese clients. After the expiration of existing permits at the end of this year, ASML may no longer be allowed to provide after-sales services or spare parts for deep ultraviolet lithography machines (DUV) to customers in China.
In the ongoing chip confrontation between the US and China, ASML plays a crucial role as the only company globally capable of manufacturing extreme ultraviolet lithography (EUV) equipment, essential for producing advanced chips at 7 nanometers and below. ASML’s technological edge positions it as a core player in this high-tech game, directly affecting US technological blockades against China and the global semiconductor supply chain landscape.
Currently, China is ASML’s third-largest market, following Taiwan and South Korea. However, in 2023, mainland China was once ASML’s second-largest market, accounting for 29% of its total revenue, second only to Taiwan.
Responding to the need to curb China’s access to high-end chips, the Dutch government’s actions reveal a complex balancing act between significant economic benefits from China and strategic threats.
Dutch Prime Minister Dick Schoof stated on August 30, “We are negotiating, the negotiations are progressing well, and we are particularly concerned about ASML’s economic interests, which need to be weighed against other risks.” Schoof emphasized, “Economic interests are crucial.”
In recent years, ASML has expressed dissatisfaction multiple times over insufficient support from the Dutch government. Former CEO Peter Wennink even threatened that if ASML’s development in the Netherlands continued to be restricted, the company would consider relocating.
Political analyst and media veteran Shi Shan stated that in recent years, China has become more overt in its challenge to the international order. Faced with such threats, Western countries are growing increasingly vigilant, but when confronted with substantial economic interests from China, countries and their associated enterprises must make choices and trade-offs. In these critical moments, the US plays a pivotal role.
Sun Guoxiang, a professor at the Department of International Affairs and Business at South China University, commented that “this chip war involves technology and market factors, and China’s vast market demand and state support will drive the development of its semiconductor industry. Western countries, meanwhile, need to maintain technological superiority while ensuring that market share is not overly consumed by China.”
He added that competition between the US and China extends beyond just the economic realm and could expand into military, diplomatic, and global governance arenas. If economic tensions escalate, regions like the South China Sea and Taiwan Strait may become potential conflict points between the US, China, and their allies.
Regarding the high-end semiconductor battle between the West and China, Xie Jinhe, Chairman of the Taiwan-based Wealth Magazine, stated that currently, the production of cutting-edge 3-nanometer chips is mainly controlled by Europe, the US, Taiwan, and South Korea. China is mainly capable of mass production on processes at 14 nanometers and above, and its chip manufacturing equipment is entirely reliant on foreign sources. With restrictions from the US, China is left with little room to maneuver in this chip warfare.
The General Administration of Customs of China announced on August 15 that it would implement export controls on rare metals like antimony, effective September 15. Antimony’s primary use is in making alloys with lead and tin, and it can also be used in flame retardants and emerging microelectronics technology, where China holds a dominant market share globally.
In fact, since July of last year, China has imposed export controls on germanium and gallium in retaliation against restrictions by Western countries on the sale of high-end chips and related manufacturing equipment to China. Germanium and gallium are essential materials in semiconductor manufacturing processes and critical materials for producing military communication devices.
According to statistics from the US Geological Survey, China accounts for 98% and 60% of global supplies of gallium and germanium, respectively. After China restricted exports, the prices of these minerals in Europe surged nearly twofold over the past year. However, reports have indicated that gallium and germanium are not particularly rare metals, but China benefits from cost advantages.
Sun Guoxiang stated, “China’s export control on critical materials aims to disrupt the semiconductor supply chain of Western countries, forcing them to reconsider their strategies for blocking Chinese technology and even gaining negotiation leverage in geopolitical games.”
In this ongoing battle, high-end chips are at the core of the game. To counter China’s challenge to the existing international order, the US, along with allies like the Netherlands, Japan, and South Korea, is moving to contain China in high-end chips and related manufacturing equipment. Besides restricting the export of specific rare metals, China is also resorting to divisive tactics, recently targeting Japan.
Several Chinese officials have issued threats to Japanese officials in recent meetings, warning that if Japan further restricts the sale of chip manufacturing equipment and services to Chinese companies, China will cut off the supply of minerals essential for Japanese automotive production.
However, on September 2, Chinese Foreign Ministry spokesperson Maoning evaded related questions, claiming to be unaware of such information.
The Japanese government revised the Foreign Exchange and Foreign Trade Act this year, bringing 23 categories of advanced semiconductor technology under export control, effective as of July 23. This move aligns with US efforts to restrict China’s access to high-end chips.
Sun Guoxiang stated, “To reduce reliance on crucial materials from mainland China, Western countries will accelerate the reorganization and diversification of supply chains, including seeking alternative sources or developing substitute materials. However, this process may take time.”
He believes that the conflict between the two sides may endure for a lengthy period, and if it escalates further, the global semiconductor supply chain could face significant disruptions.
Xie Jinhe further noted, “Since the US passed relevant chip legislation in 2021, it has been plugging loopholes and continuously strengthening measures to restrict the sale of high-end chips and manufacturing equipment to China. Meanwhile, China has been limiting the export of rare metals and related materials. However, since rare metals have substitutes, there has not been a severe shortage of semiconductor chips.” He believes that China’s control over semiconductor process materials has had a relatively limited impact on chip production.