ASML Halts Chip Equipment Shipments to China at US Request

ASML Holding NV, a Dutch manufacturer of high-end chipmaking equipment, has discontinued some of its shipments to China following a request from the Biden administration. This proactive measure was initiated only weeks before the planned enforcement of stricter Dutch export restrictions specifically targeting the manufacturer’s sophisticated machinery.

The equipment in question is ASML’s deep ultraviolet (DUV) lithography machines, regarded as the linchpin in the production of advanced electronic components. Before the halt, the manufacturer had secured licenses to ship three of these high-end machines to multiple Chinese corporations with a deadline marked for January. However, after a series of confidential discussions with U.S. officials, ASML complied with the request to halt the previously scheduled deliveries, disrupting the supply chain to China.

Despite the veil of confidentiality over these discussions, the total number of affected machines remains uncertain. Concurrently, China’s lithography machine imports spiked fivefold to $3.7 billion between July and November. Also, almost half of ASML’s Q3 sales came from China, a significant increase from previous quarters.

This strategic maneuver by the U.S. government is part of a broader initiative, in collaboration with its international allies, to counteract Beijing’s ongoing efforts to establish a robust and independent advanced semiconductor industry. Ultimately, the objective is to restrict China’s access to imported technology of this caliber. A case in point is China’s Huawei Technologies Co., which managed to create a formidable rival to the iPhone last year by utilizing chips produced with ASML’s immersion lithography machines, signaling China’s rapid progress in the high-tech industry.

The exercise of U.S. influence over ASML isn’t a recent development. Back in 2019, during the Trump administration, the U.S. government had urged the Dutch government to impose a ban on sales of ASML’s highest-tier extreme ultraviolet lithography machines to China. These machines, which are exclusively manufactured by ASML, play a critical role in fabricating semiconductors that power a diverse array of devices, from everyday smartphones to advanced military gear, showcasing their inherent importance in the technological landscape.

The implemented export curbs are expected to have a significant effect on ASML’s business in China. According to the firm’s outgoing CEO, Peter Wennink, the new restrictions are projected to impact around 15% of ASML’s sales in China. Despite facing potential financial implications, Wennink has publicly expressed his opposition to the measures, arguing that these could potentially spur China to foster and develop competing technologies, unsettling the global technological balance.