U.S. Wants ASML to Stop Selling Chipmaking Tools to China

The U.S. government officials are working with their counterparts from the Netherlands to ban sales of virtually all lithography tools produced in the country to companies in China. If the American politicians succeed, this will significantly blow Chinese efforts to become a world-class semiconductor producer and will thwart the country's Made in China 2025 plan. 

ASML is the world's largest maker of lithography tools used to make all kinds of chips. However, the company cannot sell its extreme ultraviolet (EUV) lithography equipment to its Chinese clients. Still, U.S. politicians propose restrictions under which ASML will not be able to sell its mainstream deep ultraviolet (DUV) lithography tools to Chinese customers as well, reports Bloomberg. DUV is used to make the vast majority of widely used chips that power client PCs, servers, mobile electronics, autonomous vehicles, and robots.  

Persuading the Dutch government to ban sales of virtually all lithography scanners to Chinese customers will not be easy. Chinese fabs run by local companies like Hua Hong,  Semiconductor Manufacturing International Co. (SMIC), and YMTC, or global players like TSMC, Samsung, and SK Hynix accounted for about 16% of ASML's revenue in 2021 (which reached $18.6 billion), and that is a lot of money. 

ASML argues that it is not the world's only maker of DUV scanners (albeit the largest one), and similar machinery is available from Canon and Nikon. Yet, if the U.S. manages to leave China without ASML's tools, other companies will not be able to replace them soon. Furthermore, American politicians argue that advancements in modern chip packaging technologies allow Chinese companies to design and produce pretty sophisticated chips that can advance Chinese supercomputing and, ultimately, military technologies. 

The U.S. has banned several Chinese companies from accessing technologies developed by USA-based companies, nearly driving Huawei's chip arm HiSilicon out of business. In addition, prohibiting sales of ASML's lithography tools to China will devastate the local semiconductor industry.  

Meanwhile, banning ASML's scanners to Chinese companies is not the only way the U.S. can thwart the local chip industry. Semiconductor fabs use hundreds of tools produced by numerous American companies, such as Applied Materials, KLA, and Lam Research. Forbidding them to work with China will have a devastating effect on Tianxia's semiconductor efforts. Moreover, some of their tools cannot be sold to China due to national security concerns. 

But leaving companies from China without semiconductor fabrication tools will impact the rest of the world. For example, a substantial part of DRAM and 3D NAND memory production is in China. Leaving companies like Samsung, SK Hynix, and YMTC without their Chinese fabs will affect the global chip and electronics supply chain. Furthermore, TSMC, SMIC, and Hua Hong produce loads of chips for their international clients; if they wind down production, this will also affect American chip designers.