The US is pushing the Netherlands to ban ASML Holding NV from selling to China mainstream technology essential in making a large chunk of the world’s chips, expanding its campaign to curb the country’s rise, according to people familiar with the matter.
Washington’s proposed restriction would expand an existing
moratorium on the sale of the most advanced systems to China, in an attempt to
thwart China’s plans to become a world leader in chip production. If the
Netherlands agrees, it would broaden significantly the range and class of
chipmaking gear now forbidden from heading to China, potentially dealing a
serious blow to Chinese chipmakers from Semiconductor Manufacturing
International Corp. to Hua Hong Semiconductor Ltd.
American officials are lobbying their Dutch counterparts to
bar ASML from selling some of its older deep ultraviolet lithography, or DUV,
systems, the people said. These machines are a generation behind cutting-edge
but still the most common method in making certain less-advanced chips required
by cars, phones, computers and even robots.
Shares of ASML gained as much as 2.6% in Amsterdam on
Wednesday. Its American Depository Receipts closed down 3.9% on Tuesday
following Bloomberg’s initial report. Nikon Corp., a smaller rival to the Dutch
firm in that sphere of chipmaking gear technology, closed down 5.1% in Tokyo on
Wednesday.
The issue arose during US Deputy Commerce Secretary Don
Graves’s visit to the Netherlands and Belgium in late May and early June to
discuss supply chain issues, said the people, who asked not to be identified
because the discussions were private. During that trip, Graves also visited
ASML’s headquarters in Veldhoven and met Chief Executive Officer Peter Wennink.
The Dutch government has yet to agree to any additional
restrictions on ASML’s exports to Chinese chipmakers, which could hurt the
country’s trade ties with China, the people said. ASML is already unable to
ship its most advanced extreme ultraviolet, or EUV, lithography systems, which
cost about 160 million euros ($164 million) per unit, to China as it cannot
obtain an export license from the Dutch government.
The US push on ASML comes as President Joe Biden separately
considers easing some of the Trump-era tariffs on consumer goods from China.
While China may welcome such a move at a time of tense relations between the
two powers, Biden’s administration has continued his predecessor’s efforts to
restrict China’s access to US technology.
The US Department of Commerce and the Dutch Ministry of
Foreign Affairs declined to comment.
“The discussion is not new. No decisions have been made and
we do not want to speculate or comment on rumors,” an ASML spokeswoman said.
ASML is the world’s top maker of lithography systems,
machines that perform a crucial step in the process of creating semiconductors.
ASML’s dominance of the market for that type of equipment means that further
cutting China off from access to its products would undermine the Asian
country’s ambitions to make itself more self-sufficient in production of the
crucial electronic components.
“China’s share of the global chip-equipment market is
negligible,” said Alex Capri, a research fellow at the Asia-based Hinrich
Foundation, characterizing chip production as “a choke point” in China’s plans
to bulk up its semiconductor muscle.
The older generation of machinery, DUV, is less capable than
more advanced EUV lithography equipment but remains indispensable in
manufacturing many of the types of chips that are currently experiencing acute
shortages. Washington is focused on banning sales of the most advanced type of
DUV technology, immersion lithography machines, the people said.
American officials are also trying to exert pressure on
Japan to stop shipping the same technology to Chinese chipmakers, one of the
people said. Japan’s Nikon competes with ASML in this area.
Immersion lithography is also known as argon fluoride
immersion, or simply ArFi. According to China-based Founder Securities, ASML
sold 81 ArFi systems in 2021, compared with four from Nikon, giving the Dutch
firm a 95% market share.
“We have no information regarding this matter,” a Nikon
spokeswoman said.
Dutch Prime Minister Mark Rutte said in June he is against
reconsidering trade relations with China and called for the EU to develop its
own policies toward Beijing. China is the Netherlands’ third-biggest trade
partner after Germany and Belgium.
ASML opposes a ban on sales of DUV lithography equipment to
Chinese customers because it is already a mature technology, Wennink said
earlier this year. Chinese-based facilities, run by either domestic or foreign
companies, account for 14.7% of ASML’s total revenue in 2021, according to
company disclosures and data compiled by Bloomberg.
ASML is also alleging potential IP infringement by a Chinese
tech firm supported by the country’s government.
US efforts to block the export of chipmaking equipment began
under the Trump administration. Washington pressured the Dutch government to
prevent sales of EUV lithography systems, which are required to produce the
most sophisticated semiconductors and in which ASML has a monopoly.
Major US chip-equipment makers including Applied Materials
Inc. and Lam Research Corp. are already banned from selling certain advanced
products to SMIC due to national security concerns. The potential DUV ban could
further hit SMIC and its Chinese peers.
“Lithography equipment is the most difficult equipment for
China to replace when it comes to semiconductor production,” said Johnson Wang,
an analyst at Taiwan Institute of Economic Research. “Without access to foreign
DUV lithography equipment, the progress of China’s chip industry could come to
a halt.”
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