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ASML Asks Customers to Snub Suspected Patent-Infringing Chinese Rival

ASML EUV machine
(Image credit: ASML)

In its annual report, published earlier today, photolithography systems maker ASML informed investors that a Chinese rival might be working with technologies that infringe upon its intellectual property (IP) rights. China is obviously frustrated at export blocks on ASML's advanced semiconductor manufacturing machines, and it is evident that the Chinese rival under suspicion has Beijing's stamp of approval, with its "little giant" startup designation. Bloomberg says that the Dutch company has shared its concerns with Chinese officials but has yet to initiate legal action.

ASML is keeping a close eye on Dongfang Jingyuan Electron Ltd. The company has ties to XTAL Inc., against which AMSL successfully won $845 million in a trade secrets lawsuit in 2019. Dongfang Jingyuan is a Chinese tech startup branded as a "little giant" by Beijing authorities. This label is "a valued measure of government endorsement, a signal for investors and employees that the companies are insulated from regulatory punishment," according to Bloomberg.

ASML EUV machine

(Image credit: ASML)

ASML is investigating and gathering evidence of any IP infringing practices at Dongfang Jingyuan before instigating legal proceedings. However, it doesn't look good, as inquiries and correspondence sent to both XTAL and Dongfang Jingyuan about the matters of concern remain unanswered. As a result, ASML has turned to Chinese officials with its concerns. If inter-company communication doesn't work and reaching out to government/regulators falls on deaf ears, legal proceedings could be the next step for ASML.

It is pretty easy to understand Beijing's frustrations with trade blocks currently stopping ASML from supplying its pivotal semiconductor manufacturing machines to Chinese customers. China is keen to catch up with advanced technologies spearheaded by foreign semiconductor giants, so it is rather nurturing of companies like Dongfang Jingyuan.

While the above uneasy push and pull between ASML, the US and China takes place, ASML has told key customers not to aid Dongfang Jingyuan in any way. ASML has considerable weight due to its importance in the semiconductor industry ecosystem, so this kind of soft power may be more effective than lawyering up.

Many readers will not be surprised at all to hear that ASML is doing record business. Semiconductor giants like Intel and TSMC rely on the firm's latest EUV machines for their most advanced process chips, and with the rate of new chipmaking facilities being commissioned, it looks like ASML will find it hard to keep up. Hopefully, there won't be any more fires this year.

Mark Tyson is a Freelance News Writer at Tom's Hardware US. He enjoys covering the full breadth of PC tech; from business and semiconductor design to products approaching the edge of reason.

  • 2Be_or_Not2Be
    When its customers are going to primarily be in their own country at first, yeah, I'm sure those customers will not buy the precious lithography machines. You betcha! :rolleyes:
    Reply
  • thisisaname
    2Be_or_Not2Be said:
    When its customers are going to primarily be in their own country at first, yeah, I'm sure those customers will not buy the precious lithography machines. You betcha! :rolleyes:
    Also what them machines are going to be used to produce is going to be for the Chinese market. I'm not sure there is much that can be done to stop it.
    While you could stop stuff being exported they have little real power to affect what China does.
    After all the things the Chinese have done to companies that have invested in China and companies still invest to me it looks like there is not will to do anything either.
    Reply
  • JTWrenn
    There should be international trade pressure to make it a losing proposition for China but I doubt it will happen. China has been allowed to just steal there way to dominance for a very long time because of the greed of corporations wanting to get to their massive population.
    Reply
  • Timpanogos Slim
    JTWrenn said:
    There should be international trade pressure to make it a losing proposition for China but I doubt it will happen. China has been allowed to just steal there way to dominance for a very long time because of the greed of corporations wanting to get to their massive population.

    The chinese central government has been trying to buy one of these systems outright for a few years now -- offering to pay full price, which is high but not as much as they have sunk into trying to develop their own version independently -- but the USA has been leaning hard on dutch authorities not to authorize an export license.

    I'm not saying that i support outright IP theft, but I am not surprised if they have resorted to it.
    Reply
  • Jim90
    If China has the know-how to reverse engineer and fabricate their own 'copies' then it's really not much of a bombshell to realise they're doing exactly that. They're certainly big enough to benefit extremely significantly from this even if use is restricted to within their own borders. Would it also surprise anyone to know they almost certainly have their hands on the original/s?
    In other news, water is wet.
    Reply
  • JTWrenn
    Timpanogos Slim said:
    The chinese central government has been trying to buy one of these systems outright for a few years now -- offering to pay full price, which is high but not as much as they have sunk into trying to develop their own version independently -- but the USA has been leaning hard on dutch authorities not to authorize an export license.

    I'm not saying that i support outright IP theft, but I am not surprised if they have resorted to it.

    I don't think you understand why there were trying to stop that export. This issue is why. They just steal tech like crazy so we don't want to make it easier for them.
    Reply
  • Timpanogos Slim
    JTWrenn said:
    I don't think you understand why there were trying to stop that export. This issue is why. They just steal tech like crazy so we don't want to make it easier for them.

    You'd think that would be a concern for ASML, a dutch corporation, and maybe not so much for the US department of state.

    ASML is projected to sell 3.2 billion dollars worth of equipment into mainland China this year.

    But our federal government took it upon themselves to make sure that it doesn't include the top of the line gear.
    Reply