The Netherlands says it will join the US in restricting exports of chipmaking tools to China

What just happened? The Netherlands government has announced export controls on chipmaking machinery to China, weeks after reaching an agreement with the United States to implement restrictions against the country. The new rules will build on existing restrictions that prevent most high-end products from being exported to the Asian country.

At the end of January, it was reported that the United States had completed two years of negotiations with the Netherlands and Japan to join the United States in restricting the export of chip making tools to China. The United States says this would prevent its global rival from developing semiconductors for military applications, including supercomputers, modeling nuclear weapons, and hypersonic weapons.

The Netherlands, home to chipmaking giant ASML, has become the first of the two countries to make an official announcement of the new export rules. Companies in the Netherlands are already barred from selling the most advanced ultraviolet (EUV) lithography equipment, which costs about $164 million per unit, to Chinese customers as they cannot obtain an export license from the Dutch government due to pressure from the United States. The next step will be to restrict the export of old deep ultraviolet (DUV) lithography tools.

“Considering technological developments and the geopolitical context, the government has concluded that it is necessary for national (international) security to expand existing export controls on specific semiconductor manufacturing equipment,” Foreign Trade Minister Lesje Schrenmacher wrote in a letter to Dutch lawmakers. . Neither China nor ASML was mentioned in the letter.

ASML has released a statement regarding the upcoming export restrictions, which will be introduced before the summer. He writes that the company will need to apply for export licenses for shipments of the most advanced submersible DUV systems. The measures are not expected to have a material impact on its financial outlook for 2023 or its long-term scenarios.

ASML notes that the controls do not apply to all immersion lithography tools but only those categorized as “most advanced”, although it has not yet received additional information on this exact definition. This could mean that the Netherlands’ export restrictions on chips are not as stringent as those imposed by the United States. It is unclear whether ASML will still be able to service the $8.4 billion worth of DUV machines it has sold to Chinese customers since 2014.

The United States will now wait for Japan to make a similar declaration. Some sources say it will be released this week, but the country’s commerce minister says no decisions have been taken yet.

Chinese chip companies are preparing for the new restrictions from the Netherlands and Japan by stockpiling chipmaking equipment, components, parts and materials in warehouses. We recently heard that export controls were having an impact: China’s chip imports fell 27% in the first two months of 2023, a drop larger than the total decline for all of 2022.

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