Dutch authorities will ban ASML from servicing chip production machines in China

Dutch authorities plan to restrict ASML’s repair and maintenance activities for semiconductor manufacturing equipment in China, dealing another painful blow to China’s ability to develop a world-class semiconductor industry.

Image source: asml.com

The Dutch government is expected not to renew some ASML licenses for servicing equipment in China and supplying spare parts – the permits expire at the end of 2024, Bloomberg writes, citing its own sources. The decision will affect machines operating in deep ultraviolet (DUV). The Dutch company’s industry-leading equipment is sold with the maintenance agreements needed to keep it running. The withdrawal of such support will lead to the fact that already next year some of these machines will fail.

The decision of the Dutch authorities was made under pressure from the United States. Washington has raised the possibility of introducing certain unilateral measures against partner countries, including a foreign direct supply rule, if those allies do not agree to bring their export control regulations into line with American standards, the White House told Bloomberg. The FDPR (Foreign Direct Product Rule) allows American officials to control the flow of foreign goods if they use at least a minimum set of American technologies. The largest players in semiconductor production, in addition to the United States, are the Netherlands, Japan and South Korea. Former Dutch Prime Minister Mark Rutte found ways to resist US pressure, while his successor, former intelligence chief Dick Schoof, is taking a more cautious approach in dealing with China.

China is still forced to use ASML DUV equipment, since it has not been able to independently develop its analogues. More advanced EUV scanners using ultra-hard ultraviolet radiation have never been supplied to China. They are used, in particular, to produce advanced chips from Apple and Nvidia. Without DUV equipment, it will be much more difficult for Chinese technology leader Huawei and its partner SMIC to develop their own capabilities, which, according to experts, are two generations behind industry leader TSMC.

The actions of the Dutch authorities will also affect ASML’s sales volumes, about half of which come from China. Equipment maintenance is an integral part of the day-to-day operation of a chip foundry—ASML and Applied Materials engineers are present at the sites of major customers including TSMC, where they help solve problems in real time. ASML employees are also present in Chinese factories, but American companies had to withdraw their workers from them due to sanctions. Equally important is the ability to supply spare parts for equipment – its failure will force the semiconductor manufacturer to reduce production volumes.