According to an earlier report from Bloomberg, the Dutch government may restrict ASML’s after-sales services for Chinese customers. Regarding the matter, the Dutch Prime Minister Dick Schoof has stated that the government’s decisions will prioritize ASML’s actual interests to avoid jeopardizing its global position, according to a report by Reuters.

ASML derives about 20% of its total revenue from after-sales services. Per the same Reuters’ report, while Dick Schoof did not comment on rumors that Netherlands would put more curbs on ASML’s China chip business, he highlighted that negotiations are progressing smoothly.

Moreoever, the Dutch government is particularly focused on balancing ASML’s interests with other risks, as the authority has acknowledged that the economic interests are extremely crucial, he noted.

He reiterated that ASML represents an extremely important and innovative industry for the Netherlands and should not face any setbacks, as that would harm its global standing, according to Reuters.

ASML plays a crucial role in the global semiconductor supply chain, as the production of advanced chips heavily reliant on its lithography machines.

Per another Reuters report, in 2023, China became ASML’s second-largest market, accounting for 29% of its total revenue, following Taiwan. This surge in China’s market share was driven by a rush to purchase ASML’s DUV machines before stricter U.S. export restrictions took effect.

Due to U.S. government pressure, the export of the most advanced Extreme Ultraviolet (EUV) lithography machines to China has been banned.

Recently, ASML has expressed dissatisfaction with the Dutch government’s lack of support, with former CEO Peter Wennink even reportedly threatening to relocate the company’s headquarters if its development continues to be constrained.

Wennink has publicly opposed export restrictions to China, warning that such measures could stimulate China to develop new technologies and compete with ASML.

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(Photo credit: ASML)

Peter Wennink, former CEO of ASML, recently stated in an interview with Dutch broadcaster BNR that the chip war between China and the US lacks factual basis and is entirely driven by ideology. According to reports from Reuters and the Commercial Times, Wennink also anticipated that this chip war will not be resolved anytime soon and could potentially persist for decades.

The global EUV lithography supplier ASML stands out as the world’s largest and most advanced EUV company, as both TSMC and Samsung utilize EUV equipment for manufacturing, covering TSMC’s 7nm, 5nm, and 3nm processes and Samsung’s EUV Line (7nm, 5nm, and 4nm), along with the 3nm GAA process.

Wennink further emphasized that ASML has been operating in China for over 30 years, serving numerous customers and employing a large workforce locally. Therefore, the company feels obligated to protect the rights and interests of its customers and employees.

He acknowledged striving to maintain a balance between the US and China during his tenure, advocating on one hand for the US government to relax export restrictions and on the other hand raising concerns with Chinese officials about intellectual property infringements.

According to the reports, Wennink brought up the concerns from the U.S. authority about which party he sided with. Wennink noted that officials in Washington might sometimes think he’s friend of China. However, he is a friend to ASML’s customers, suppliers,  employees and shareholders. He then forecasted that given geopolitical interests are at stake, the chip war could take decades to play out.

Before retiring in April this year, Peter Wennink led ASML for a decade, transforming it into Europe’s largest semiconductor equipment manufacturer. During his tenure, China’s semiconductor influence rapidly grew, becoming ASML’s second-largest customer outside of Taiwan.

Since imposing export restrictions on China in 2018, the US has gradually expanded the list of controlled product categories, thus impacting ASML. In April this year, the US announced the latest round of export restrictions, limiting ASML’s ability to service high-end products already shipped to China.

At the time, Wennink emphasized that these new restrictions would not significantly impact ASML’s financial performance from 2025 to 2030, as only a small portion of its Chinese customers would be affected

Besides Netherlands, a previous report from Reuters on June 19 also mentioned that Japan, home to several chip equipment manufacturers like Nikon and Tokyo Electron, imposed restrictions on the export of 23 types of machinery to China to align with U.S. government policies aimed at curbing China’s technological advancements.

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(Photo credit: iStock)

According to a report from Reuters on June 19, to further restrict China’s semiconductor industry and prevent the use of semiconductor manufacturing equipment in military applications, Alan Estevez, the U.S. Commerce Department’s Under Secretary for Industry and Security, will visit the Netherlands and Japan.

Reportedly, Estevez will visit the Netherlands and Japan, with the primary objective of further limiting China’s ability to manufacture advanced semiconductors and preventing China from using chip manufacturing equipment to enhance its military capabilities. Additionally, the U.S. may add another 11 Chinese chip companies to the restricted list.

Sources cited by the report indicate that this move includes limiting the activities of equipment suppliers such as ASML and Japan’s Tokyo Electron in the Chinese market. Special attention will be given to Chinese chip manufacturers developing high-bandwidth memory (HBM) chips.

The report from also states that in July 2023, to align with U.S. government policies aimed at curbing China’s technological advancements, Japan, home to several chip equipment manufacturers like Nikon and Tokyo Electron, imposed restrictions on the export of 23 types of machinery to China. These machines range from those used for depositing thin films on silicon wafers to etching micro-integrated circuits. Similarly, the U.S. has imposed related restrictions on American companies such as Applied Materials and Lam Research.

Following Japan, the Dutch government also restricted ASML from exporting deep ultraviolet (DUV) lithography machines to China. The U.S. has not allowed some Chinese foundries to purchase additional advanced DUV machines. Prior to this, ASML had already ceased the export of even more advanced extreme ultraviolet (EUV) lithography machines to China.

With the Netherlands imposing new restrictions on the export of advanced chip manufacturing equipment effective from January, ASML previously announced that starting from 2024, they would not be able to ship NXT:2000i and higher DUV lithography equipment to China.

Equipment below NXT:2000i, including NXT:1970i and NXT:1980i, would also be restricted from shipment to advanced process fabs in China. ASML’s Chief Financial Officer, Roger Dassen, anticipated that this will impact 10% to 15% of sales in the Chinese market in 2024.

On the other hand, it has been reported that the U.S. government is in discussions with its allies about adding another 11 Chinese chip manufacturers to the blacklist. During a visit to the Netherlands in April this year, U.S. officials attempted to prevent ASML from continuing to provide maintenance services for equipment used in China. However, since ASML’s service contracts with Chinese customers are still valid and the Dutch government lacks the extraterritorial authority to terminate these contracts, this effort faced significant challenges.

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(Photo credit: iStock)

Japan is reportedly planning to expand export restrictions on four technologies related to semiconductors or quantum computing, as per a report from Bloomberg. This move is said to represent the latest initiative in global efforts to control the transfer of strategic technologies.

The same report indicates that Japan’s new measures will affect the export of scanning electron microscopes used for analyzing nano-particle images, as well as the technology for improving semiconductor design known as Fully Depleted Silicon on Insulator (FD-SOI) technology. Japan will also require licenses for the low-temperature CMOS circuits used in quantum computers, as well as for the outputs of quantum computers themselves. These restrictions apply to Japan’s most significant trading partners, including South Korea, Singapore, and Taiwan.

The Japanese Ministry of Economy, Trade, and Industry recently stated that the purpose of this plan is to better regulate the export of components for military purposes and to align with similar initiatives around the world. Reportedly, the Ministry emphasized that after public consultations ending on May 25th, while this plan is expected to take effect as early as July.

In fact, in 2023, Japan expanded export restrictions on 23 types of cutting-edge semiconductor manufacturing technologies. The implementation of these controls followed after the United States restricted China’s access to crucial semiconductor fabrication technologies. At that time, reportedly, Washington officials lobbied international partners such as Japan and the Netherlands to impose trade sanctions on China, aligning with the U.S. view of China as a geopolitical and potential military competitor.

Export controls chief Alan Estevez, as reported by Reuters during an annual conference, emphasized the importance of discussions with allies regarding key component servicing. He mentioned ongoing efforts to assess which components require servicing, hinting at the US’s reluctance to impose restrictions on non-core components that Chinese firms can repair independently.

Since then, the US has reportedly been urging allies such as the Netherlands, Germany, South Korea, and Japan, urging them to further tighten restrictions on China’s access to advanced chip technology.

According to a previous report from Nikkei News, the U.S. government initiated semiconductor export controls in various fields, including manufacturing equipment, in October 2022. This decision stems from the belief that semiconductors, which play a crucial role in new-generation technologies such as AI and autonomous driving, are strategic commodities directly related to national power.

Consequently, the U.S. government requested further cooperation from Japan and the Netherlands, leading to both countries strengthening their controls in 2023. However, despite these measures, exports of related products, excluding those under control, to China are sharply increasing. Therefore, the U.S. government believes it is necessary to urge Japan and the Netherlands, which have advantages in semiconductor manufacturing equipment, to take further actions.

Currently, manufacturing equipment required for advanced semiconductors with range of 10 to 14 nanometers and below are subject to export control restrictions. The United States is pushing to expand regulations to include certain equipment for what are known as general-purpose semiconductors.

This request is believed to potentially encompass exposure equipment used on silicon wafers, as well as etching equipment for three-dimensional stacking in. Among Japanese companies, Nikon and Tokyo Electron possess advanced capabilities in this field.

The same report from Nikkei News further notes that the restrictions also extend to materials related to Shin-Etsu Chemical Industries, such as photosensitive materials, and demand restrictions on exports to China. Additionally, the United States is preparing to request that the Netherlands cease providing maintenance and services for manufacturing equipment sold to China before the 2023 regulations. The strengthened control will also have a certain impact on allied countries.

Currently, Dutch company ASML is believed to still be providing such services to Chinese buyers. Per ASML’s financial report, during Q1, machine revenue from the Chinese market increased significantly from the previous quarter’s 39% to 49%.

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(Photo credit: ASML)

The leading Dutch semiconductor equipment company ASML has reportedly predicted continued strong demand from Chinese customers, with approximately 20% of the company’s backlog attributed to them.

According to reports from Reuters and CNBC, ASML CEO Peter Wennink stated during the first-quarter (January-March) earnings call on April 17th that discussions are ongoing between the Dutch and U.S. governments regarding national security concerns.

In October 2023, the U.S. Department of Commerce expanded its export control regulations on China, with the new provisions taking effect from November 2023.

These regulations specifically restrict the Dutch company ASML from selling certain immersion Deep Ultraviolet (DUV) lithography equipment to Chinese facilities engaged in advanced semiconductor manufacturing. Consequently, Chinese customers turned to purchasing mature process equipment in large quantities, leading to nearly 2 consecutive months of surge in China’s equipment import at that time.

As per information disclosed by ASML during its earnings call, it is currently able to continue serving Chinese customers who have already installed its equipment.

ASML’s CFO Roger Dassen further indicated that Chinese customers account for approximately 20% of the company’s backlog orders. He noted that Chinese chip manufacturers are expanding their production for mature processes, with these chips falling outside the export restrictions of the United States and its allies, primarily used in appliances like refrigerators, phones, toys, and automobiles.

Dassen noted that demand from China is robust due to their expansion of production capacity. As a result, China’s global market share is expected to grow larger in the coming years, leading to increased self-sufficiency compared to the present.

Per ASML’s financial report, during Q1, machine revenue from the Taiwan and South Korean markets decreased from the previous quarter’s 13% and 25% to 6% and 19%, respectively. In contrast, machine revenue from the Chinese market increased significantly from 39% to 49%.

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(Photo credit: ASML)