Dutch semiconductor machinery giant ASML Holding NV (NASDAQ:ASML) has found itself in thrall of the Dutch government’s alignment with US tech sanctions against China.
At stake is ASML’s mid-range deep ultraviolet (DUV) lithography technology- a crucial cog in the global semiconductor supply line of which ASML commands a global monopoly.
Today, the Dutch government announced expanded export controls which will further limit the sale of these devices into the Chinese market.
ASML’s extreme ultraviolet (EUV) lithography machines, which can sell for as much as $370 million and are used to print the most cutting-edge artificial intelligence chips, were already subject to export controls.
From tomorrow, Netherlands-based companies will have to apply for authorisation when exporting DUV machines, such as ASML’s TWINSCAN NXT:1970i and 1980i devices.
The Hague intends to assess applications “on a case-by-case basis” with all exports from the Netherlands to destinations outside the European Union covered.
But there is little doubt that China is the focal point of these export controls.
Furthermore, it appears that the Hague has imposed these controls under pressure from the US government, which has ramped up tech sanctions against China in a bid to stave off the country’s military tech advances.
US export controls stipulate that “foreign-produced encryption technology that incorporates US origin encryption technology… is subject to (export controls) regardless of the amount of US origin content”.
In other words, since ASML incorporates US-made elements into its devices, ASML must comply with US rules.
The US had previously pressured ASML to cease servicing some equipment it had earlier sold to Chinese customers.
This raises questions of sovereignty and extraterritoriality in the US administration’s imposition of export controls of foreign entities.
However, the Netherlands, alongside Japan, voluntarily entered into an agreement with Washington in January 2023 to unilaterally agree to these export controls.
"I'm making this decision for our safety,” Dutch trade minister Reinette Klever said when announcing the expanded export controls on Friday. “We see that technological advances have given rise to increased security risks associated with the export of this specific manufacturing equipment, especially in the current geopolitical context.
“The Netherlands has a unique, leading position in this area. This entails certain responsibilities, which we take seriously.
“The Dutch semiconductor industry needs to know what it can expect. We have proceeded in a careful and targeted manner, so as to minimise the disruption to global trade flows and value chains.”
In response to the Hague’s announcement, ASML said: “Since this is a technical change, this announcement is not expected to have any impact on our financial outlook for 2024 or for our longer-term scenarios as communicated during our Investor Day in November 2022.”