China Furious After Dutch Company Cancels Semiconductor Export

The White House has reportedly pressured semiconductor equipment manufacturer ASML to halt shipments of specific proprietary machines to China. ASML, a Dutch company, made this decision just before a ban on high-tech machinery exports went into effect at the end of January. The Netherlands had also revoked an export license for some of ASML’s hardware.

The Biden administration has continued the efforts of its predecessor to curb China’s advancements in emerging technologies such as artificial intelligence and supercomputing. These technologies are seen by the United States and its allies as a national security threat if in China’s hands. In response, China has threatened to restrict U.S. access to rare earth elements and other critical minerals necessary for manufacturing future technologies.

Chinese Foreign Ministry representative Wang Wenbin condemned the United States for excessively applying the concept of national security and pressuring other nations to participate in its technological embargo against China.

Wang highlighted the global interconnectedness of the chipmaking industry and denounced Washington’s “domineering and oppressive tactics” as breaches of international trading norms that undermine the industry. He cautioned that such measures would have adverse effects and urged the Netherlands to honor the principles of their agreement, thereby safeguarding the stability of mutual interests and industrial supply chains in both countries.

Last year, the Chinese government appealed to Dutch Prime Minister Mark Rutte to set aside national security worries and allow increased access to sophisticated chip-making technology. Data from Chinese customs in November revealed a substantial increase in semiconductor imports, suggesting a strategic accumulation in response to expected future restrictions.

ASML currently monopolizes the production of extreme ultraviolet (EUV) lithography machines, crucial for manufacturing modern technologies like smartphones, electric cars, fighter jets, and guided missiles. These machines use lasers to “print” circuit patterns onto thin wafers made from silicon or germanium. The industry often refers to these microchips as “the oil of the 21st century.”

ASML announced that it has gained additional insights into the extent and implications of U.S. export control regulations. The company expects no major effect on its financial performance in 2023 as a result of the revised export controls or the Dutch government’s decision to partially withdraw its license to export certain lithography machines.

Concerns were raised last summer when Huawei announced its domestically produced 7-nanometer processor for its latest smartphone model, the Mate 60, despite strict U.S. export controls. While this seemed like a technological leap, doubts were cast on China’s ability to produce the processor at scale, which is essential for commercial success.