Netherland Denies China ASML’s Advance Lithography Systems

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ASML dominates the lithography systems market and China was ASML’s biggest market for Q3 with 49% of company sales.

Advanced Semiconductor Materials Lithography (ASML), a leading computer chip equipment maker based in the Netherlands, has faced a significant development as the Dutch government partially revoked an export licence for the shipment of NXT:2050i and NXT:2100i lithography systems bound for China. This decision, influenced by U.S. government pressure and aimed at limiting China’s ability to manufacture its own advanced chips, has led to a decline in ASML’s shares and criticism from Beijing.

The affected machines are part of a model range that required a Dutch licence for export to China from September 2023, following U.S. regulations. ASML noted that this move would impact sales to a limited number of advanced production facilities in China. The exact number of machines affected by this cancellation remains unclear, but ASML assured that it would not materially impact its earnings for 2023. Consequently, ASML’s shares fell by 2.5%, closing at 664.3 euros ($728.14) on the first trading day of 2024.

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China, which has been ASML’s third-largest market after Taiwan and South Korea and its biggest in the third quarter of 2023 with 49% of company sales, has expressed its concerns. Beijing urged the Netherlands to consider the common interests of both countries and their companies and to maintain the stability of international supply chains. 

The Dutch foreign ministry responded by stating that export licence requests are reviewed on a case-by-case basis, considering national security grounds. ASML dominates the market for lithography systems. The denial of access to ASML’s two most advanced lithography machines means Chinese customers, including major firms like Semiconductor Manufacturing International Corporation (SMIC) and others, will need to seek alternative solutions and adapt their production strategies.

In the face of these U.S.-led restrictions, the Chinese government has been heavily investing in developing a self-reliant semiconductor supply chain. Shanghai Micro Electronics Equipment (SMEE) is the only known Chinese manufacturer of lithography machines. Although SMEE is several generations behind the current cutting-edge technology, the recent announcement of developing a lithography machine for the 28nm production node marked a significant step for the company and China’s semiconductor ambitions. However, the announcement was later retracted without explanation.

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