Chip War Intensifies: U.S. and Netherlands impose stricter controls on chipmaking equipment sales to China

The United States and the Netherlands are intensifying their efforts to curb China’s chipmaking capabilities by imposing further restrictions on the sales of chipmaking equipment, Reuters reported. These measures are part of a broader strategy to prevent China from leveraging foreign technology to enhance its military capabilities.

The Dutch government and prominent Dutch company ASML plan to impose limitations on certain equipment. At the same time, the United States is expected to go even further by exerting its influence to restrict the supply of Dutch equipment to specific Chinese fabs. Official comments have not been provided by the Dutch government, ASML, or the U.S. Commerce Department, which oversees export controls.

The United States had previously imposed export restrictions on American chipmaking tools to China in October, citing national security concerns. The U.S. government also encouraged other countries with key suppliers to implement similar curbs.

In response to these actions, Reuters cited Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, who condemned the move, accusing the U.S. of intentionally hindering Chinese companies and promoting decoupling. Pengyu further affirmed that China would closely monitor the developments and steadfastly protect its own interests.

Global Restrictions Tighten

Japan, home to chip equipment manufacturers Nikon Corp and Tokyo Electron Ltd, has subsequently adopted regulations to restrict the export of 23 types of semiconductor manufacturing equipment. These regulations will take effect on July 23. The Dutch government is set to announce new regulations on Friday, as per Reuters, including a licensing requirement for ASML’s second-best product line, deep ultraviolet (DUV) semiconductor equipment. It is important to note that ASML’s most advanced machines, extreme ultraviolet (EUV) lithography machines, are already subject to restrictions and have never been shipped to China.

ASML disclosed in March that it anticipates the Dutch regulations to impact its TWINSCAN NXT:2000i and more sophisticated models. However, the United States may withhold even the older DUV models, such as the TWINSCAN NXT:1980Di, from approximately six Chinese facilities. According to an anonymous source cited by Reuters, the specific facilities are expected to be identified in a forthcoming U.S. rule, enabling restrictions on foreign equipment with even a small percentage of U.S. parts from reaching those sites. The effective date for the new Dutch regulations is not expected to be immediate but rather anticipated to be in September, two months after publication.

More Regulations to follow

According to the same source cited by Reuters, the proposed U.S. rule, likely to be published by late July, will mandate licenses for exporting equipment to around six Chinese facilities, including a fab operated by SMIC, China’s largest chipmaker. However, licenses for shipping equipment to these facilities will likely be denied. ASML, being the world’s leading chip equipment manufacturer and the largest company in the Netherlands, is expected to fall under the scope of U.S. rule due to the inclusion of U.S. parts and components in its systems.

It is worth noting that the proposed regulations are subject to potential modifications before final implementation. The plan outlined reflects the late June thinking of the involved parties. In addition to the abovementioned developments, the United States is expected to unveil further updates to its comprehensive October rules in July.

ASML, renowned as Europe’s largest chip equipment company due to its dominance in lithography, a critical step in the chip manufacturing process, may be one of many companies impacted by the new Dutch regulations. Other firms, including ASM International, a specialist in atomic layer deposition, could also face repercussions. ASM International declined to comment ahead of Friday’s official announcement.

(With Inputs from Reuters)