Netherlands Follows U.S. in Limiting Chip Exports to China

tendata blogMarket Insights

ten data blog04-07-2023

chip,chips,netherlands chips

The Netherlands announced new export restrictions on advanced semiconductor equipment Friday amid U.S. pressure to cut off China's supply of key chip-making tools.

The U.S. is in an arms race with China over control of semiconductor supplies, particularly certain computer chips used in supercomputing and artificial intelligence.

Such chips create a $500 billion (£395 billion) industry that is expected to double by 2030, and it is thought that whoever controls the supply chain - the network of companies and countries that make them - holds the key to becoming an unrivaled superpower.

The Dutch government says Dutch companies will need to apply for a license to export certain advanced semiconductor manufacturing equipment overseas under regulations that will take effect on Sept. 1.

The Netherlands is home to one of the world's most important semiconductor companies, ASML. ASML makes the machinery needed to produce state-of-the-art chips.

ASML said in a statement that it will "continue to comply with applicable export regulations, including those of the Netherlands, the European Union and the United States.

The company added that it does not expect the measures to have a "material impact" on its finances.

U.S. pressure

Last October, the U.S. introduced sweeping rules aimed at cutting off exports of key chips and semiconductor tools to China, a move analysts said could hinder Beijing's ambitions to upgrade domestic technology. Since then, the U.S. has been stepping up pressure on major chip-making nations, as well as allies such as the Netherlands and Japan, to impose their own export restrictions.

Washington has sought to side with the Netherlands because of ASML's key role in the advanced chip sector. The Dutch government took a wait-and-see approach but imposed restrictions on exports of advanced semiconductor equipment in March. Friday's announcement finalizes those rules and makes it clearer what can and can't be exported.

The law does not name any country individually, nor does it explicitly name ASML.

The Dutch government said the rules apply to "many very specific technologies used in the development and manufacture of advanced semiconductors" that could be used in areas such as military applications.

"We have taken this step for national security reasons. It is beneficial for the companies that will be affected to know what to expect. This will give them the time they need to adapt to the new rules," Dutch Trade Minister Liesje Schreinemacher said in a statement.

ASML caught in the middle

ASML's machine is used by advanced chipmakers such as TSMC. It makes two key tools.

The first is a so-called immersion deep ultraviolet (DUV) lithography machine, which is used to make memory chips. These chips are used in a wide range of devices, from smartphones to laptops and servers, and could eventually be used in artificial intelligence applications.

The second, called an extreme ultraviolet (EUV) lithography machine, is used to make more advanced chips.

ASML says it now needs to apply for a license to export its state-of-the-art immersion DUV lithography system, called TWINSCAN NXT:2000i and subsequent tools.

Since 2018, the Dutch government has used a different set of rules to restrict the export of ASML EUV machines. However, EUV exports will now be subject to a law that takes effect in September.

ASML said it can begin submitting export licenses before the law takes effect, and the government will approve or deny those applications on a case-by-case basis.

The company added that it does not expect the measures announced Friday to have a significant impact on its financial outlook for 2023.

China Responds

The Chinese Embassy in the Netherlands called the Dutch government's latest law "an abuse of export control measures and a serious disruption of free trade and international trade rules.

The embassy statement said, "We call on the Dutch side to immediately correct the wrongdoing from the perspective of safeguarding international trade rules and bilateral economic and trade cooperation."

The embassy said it is willing to work with the Dutch side to solve this problem in the principle of mutual benefit and win-win situation, and jointly promote the healthy development of China-Dutch economic and trade relations.

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