How ASML became a plaything in the political conflict between the US and China

Five years of politics powerplay at the highest level. At stake: the chip machines of ASML from Veldhoven in Brabant, which have become a crucial pawn in the economic battle between the US and China. Because whoever produces the fastest chips determines the speed of technological progress.

On Wednesday it appeared that China has to fight this battle without ASML’s best lithography machines, the devices that produce computer chips. From now on, ASML may use both its state-of-the-art EUV machines (extreme ultraviolet) as the latest version of the less advanced DUV machines (deep ultraviolet) only sell to China with a Dutch export license. In practice, this means that ASML – now dependent on China for 9 percent of its turnover – will sell its sought-after devices to other countries.

With this step, the Netherlands gives in to great American political pressure, initiated in 2018 by the government of Donald Trump. Under his rule, the United States began to antagonize China by preventing the country from importing high technology. Current President Biden has further tightened that approach.

The decision has no major financial consequences for ASML, the company responded Wednesday. ASML still has 40 billion euros worth of orders outstanding, and the waiting time for an EUV machine worth 150 million euros is eighteen months. ASML CEO Peter Wennink spoke to the British business newspaper this week Financial Times well concerned that China will seize the measures to work even harder on its own chip machine. And in doing so, the country will attempt to steal ASML’s technology.

It is not clear with what arguments and under what conditions the Netherlands allowed itself to be convinced by the Americans. Prime Minister Rutte announced at the beginning of this year that he could not reveal anything about the negotiations due to ‘national security’.

How did it get this far?

2018: The US wakes up

Mike Pompeo, the US Secretary of State under Trump, sees a golden opportunity in 2018. The Dutch government has granted an export license to ASML to sell an EUV machine to the Chinese chip manufacturer SMIC. The trade war between the US and China has just broken out and the Americans are looking for ways to thwart China.

The Trump administration puts heavy pressure on the Netherlands at various times in 2018 and 2019 to block sales, reveals news agency Reuters in January 2020. Officials of the US Department of Defense speak with Dutch officials about ASML at least four times.

July 2019: a report for Rutte

The Americans are stepping up the pressure. An opportunity presents itself in July 2019 when Prime Minister Rutte visits Donald Trump in the White House.

There, Rutte will be shown a confidential intelligence report a day before the appointment – ​​according to Reuters sources – which describes possible consequences if China gets hold of ASML technology. For example, Chinese chip manufacturer SMIC could use ASML’s machines to produce advanced chips for the Chinese military.

That strategy works. Four months after the meeting reports the Japanese news organization Nikkei that the supply of ASML’s EUV machine to China has been suspended until further notice. As it turns out later, the Dutch government has decided not to extend the export license previously granted to ASML for the sale.