Dutch chip-making equipment manufacturer ASML was forced to cancel some shipments to China after having licenses partially revoked, in a blow to China's efforts to stockpile related technology ahead of new restrictions. “A license for the shipment of NXT:2050i and NXT:2100i deep ultraviolet (DUV) lithography systems in 2023 has recently been partially revoked by the Dutch government, impacting a small number of customers in China,” the company said in a statement.
Chinese Foreign Ministry Spokesman Wang Wenbin condemned the “hegemonic and bullying behavior” from the U.S., urging the Netherlands to uphold fair market principles and honor its contractual obligations. Under U.S. pressure, ASML already restricts Chinese clients from buying its more advanced extreme ultraviolet (EUV) lithography systems, which are used to produce the world’s most cutting-edge chips. ASML has a near monopoly on the machines. However, from September, the Dutch equipment maker had been able to apply for licenses to ship some of its less advanced DUV systems to China ahead of new restrictions that came into effect on January 1. The Dutch manufacturer received three such licenses.
Lithography tools are complex projection systems that are considered the most important equipment needed in the process of producing integrated circuits. China is considered years behind in this technology, and has so far struggled to close the gap with leading foreign firms despite heavy government investment. Ahead of the Dutch restrictions, and following the expanded U.S. export restrictions on DUV machines in October, Chinese manufacturers have been importing and stockpiling record numbers of chip-making equipment from abroad. China imported 42 lithography systems in November for USD816.8 million, with companies in the Netherlands and Japan accounting for nearly the entire amount spent on such imports. China’s imports of critical chip-making lithography systems from the Netherlands, in particular, surged 1,050% in value that month. The Netherlands is the biggest exporter of lithography machines, almost all of which come from ASML – though the company does not have the same hold on the DUV market as on EUV.
After a teardown of Huawei Technologies’ latest 5G smartphone, the Mate 60 Pro, experts concluded that Chinese chip maker Semiconductor Manufacturing International Corp (SMIC) produced the device’s advanced 7-nanometer chip using DUV lithography machines, and some experts predicted more would be done to restrict China’s access to such technology. Citing anonymous sources, Bloomberg reported that U.S. President Joe Biden’s administration had requested that ASML cancel several shipments of DUV systems to China weeks ahead of new rules coming into force this month. A spokeswoman from ASML declined to comment on that timeline, but noted that it was unlikely that the company would receive new licenses for the NXT:2050i and NXT:2100i DUV machines in 2024.
In recent years, China has been ASML’s third-largest market after Taiwan and South Korea, but it jumped to first place in the third quarter of 2023, accounting for 46% of sales, up from 24% in the previous quarter and 8% in the first quarter. In November, Shen Bo, Senior Vice President of ASML and President of its China arm, reportedly signaled that the company was working to speed up deliveries to China to meet demand for DUV machines, the South China Morning Post reports.
