ASML Holdings and Lam Research, the world’s top chip-making tool providers, are scrambling to comply with the latest U.S. trade restrictions on China by pulling American engineers out of their operations in the country. ASML, which has a global monopoly in the supply of extreme ultraviolet (EUV) lithography systems, has issued an internal memo asking its U.S. employees, including green card holders, to refrain from directly or indirectly serving customers in China until further notice. The move is aimed at addressing compliance risks following a new U.S. requirement that restricts the involvement of U.S. employees in advanced chip facilities in China. “ASML is still actively assessing which particular fabs are affected by this restriction,” according to a memo the company issued to its U.S. management team.
Meanwhile, wafer fabrication equipment supplier Lam Research, along with KLA Corp, which supplies process control systems for the semiconductor industry, have pulled U.S. engineers out of supporting equipment installed with Chinese clients, including China’s top memory chip maker Yangtze Memory Technologies Co. In a visit to Lam Research’s Shanghai office at the Zhangjiang Hi-Tech Park, known as the city’s Silicon Valley, employees approached by the South China Morning Post turned away when asked about the matter. A marketing official from the Shanghai office said the company had nothing to say on the issue.
Lam’s reticence on the matter comes as U.S. employees of chip-related businesses in China rush to comply with new regulations from the U.S. Bureau of Industry and Security. The latest restrictions are expected to inflict a heavy blow on China’s semiconductor industry as engineers and executives with U.S. passports or citizenship play an important role in China’s developing chip industry. Wang Lifu, Shanghai-based Analyst at semiconductor consultancy ICWise, said suppliers such as ASML and KLA, as well as their Chinese clients, would suffer.
ASML, headquartered in Veldhoven, the Netherlands, established its China operations in 2000 and currently owns 12 office buildings in the country. Founded in 1980, Lam Research is a Silicon Valley-based supplier of wafer fabrication equipment, whose founder David K. Lam is a Chinese-born engineer who previously worked at Xerox, Hewlett-Packard, and Texas Instruments. China has been an important market for Lam Research and it still has a number of job openings in Shanghai. Shen Bo, ASML Senior Vice President and Country Manager for China, said that the company has increased the number of its local personnel from less than 500 in 2017 to more than 1,500 as of the end of August, the South China Morning Post reports.
The Bureau of Industry and Security (BIS), an agency under the U.S. Department of Commerce, on October 7 also implemented updates that further restrict China’s ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors used in military applications, including weapons of mass destruction. The updates add new license requirements for items destined for Chinese chip foundries, which will face a “presumption of denial”. By comparison, sales to mainland chip fabrication facilities owned by multinationals will be decided on a case-by-case basis. The relevant thresholds include: logic chips of 16-nanometre, 14nm, or below; dynamic random access memory chips of 18nm half-pitch or less; and NAND flash memory chips with 128 layers or more.
“A siege is forming,” said Arisa Liu, Senior Semiconductor Research Fellow at the Taiwan Institute of Economic Research. “The intensified U.S. tech export restrictions aim to strike at China’s abilities in super computing, artificial intelligence and semiconductor manufacturing.” In addition, the U.S. is imposing new license requirements to export items used to develop or produce semiconductor manufacturing equipment and related items. the South China Morning Post adds.
The Chinese Semiconductor Industry Association said it opposes the U.S. Department of Commerce’s latest restrictions on U.S.-based hardware manufacturers selling advanced chips and chip-making equipment to China as they arbitrarily interfere with international trade. “We hope that the U.S. government can correct these wrong practices in a timely manner, return to the framework of the international trade consultation mechanism of the World Semiconductor Council and the Government/Authorities Meeting on Semiconductors, fully communicate, effectively exchange views and seek consensus,” the Association said in a statement. The U.S. Department of Commerce published a new set of export controls on October 7, which included a measure to cut China off from certain chips made anywhere in the world with U.S. equipment. The latest U.S. export controls also tightened rules on the sale of semiconductor manufacturing equipment to companies that produce advanced logic chips in China.
Zhong Xinlong, Senior Consultant at the Beijing-based China Center for Information Industry Development Consultancy, said the restrictions affect not only U.S. semiconductor companies but also foreign companies that have advanced chip plants in China. South Korea's SK Hynix and Samsung Electronics received a one-year waiver from the U.S. government for their chip-making factories in China to import semiconductor equipment without applying for permission from Washington. SK Hynix and Samsung Electronics have production lines in Wuxi and Xian for DRAM and NAND flash chips respectively. The Chinese mainland is the world’s largest market for semiconductor manufacturing equipment, with sales reaching USD29.62 billion last year, up 58% year-on-year, accounting for almost 29% of the global semiconductor equipment market, the China Daily reports.
