Netherlands Joins US In China Chip Export Restrictions

The government in the Netherlands has on Wednesday said it plans new restrictions on the export of semiconductor technology on national security grounds.

The Dutch government confirmed for the first time that it will impose new export controls on microchips manufacturing equipment to “protect national security”, after US pressure to halt the sale of chip printing machines from ASML to China.

China has criticised the Dutch plan, after Chinese foreign ministry spokesperson Mao Ning said it was “firmly opposed” to the Dutch decision, saying it would “intervene and limit normal economic and trade exchanges.”

US agreement

China has reportedly launched a formal complaint against the move.

The Dutch move is a big win for the United States, as ASML is Europe’s biggest tech firm, based in Veldhoven, and has sold more than €8bn (£7.1bn) of advanced machinery used to make semiconductors to Chinese customers since 2014.

The US and the Netherlands had reached an agreement to introduce new export restrictions on advanced chip technology to China at the end of January, but until now, the Dutch government hadn’t commented publicly on it.

The deal, which also included Japan, involves the only three countries that are home to manufacturers of advanced machines to print microchips.

The confidential agreement came after US president Joe Biden met separately with Japanese prime minister Fumio Kishida and Dutch prime minister Mark Rutte earlier this year.

A US official then acknowledged the deal with Japan and the Netherlands for new restrictions on chip-making tool exports to China, but declined to provide details.

In Japan the controls would affect companies such as Nikon and Tokyo Electron, and in the Netherlands it will impact market leader ASML.

China clampdown

The US had announced its latest round of export controls in October 2022, which are designed to hamper Beijing’s ability to ramp up its domestic chip industry, which is being used to enhance the military capabilities of Beijing.

Things took a sinister turn last month, when ASML revealed that it had suffered a data theft of its IP – by a former employee located in China.

It is understood that the data that was misappropriated involved documents.

ASML did not expand on the details.

Dutch restrictions

Now on Wednesday Dutch Trade Minister Liesje Schreinemacher announced the decision in a letter to the Dutch parliament, saying the restrictions will be introduced before the summer.

Her letter did not name China or ASML Holding, but both will be affected, Reuters reported.

The letter specified one technology that will be impacted is “DUV” lithography systems, the second-most advanced machines that ASML sells to computer chip manufacturers.

“Because the Netherlands considers it necessary on national security grounds to get this technology into oversight with the greatest of speed, the Cabinet will introduce a national control list,” the letter reportedly said.

ASML dominates the market for lithography systems – multimillion dollar machines that use powerful lasers to create the minute circuitry of computer chips.

The Dutch announcement however leaves major questions unanswered, such as whether ASML will be able to service the more than 8 billion euros ($8.44 billion) worth of DUV machines it has sold to customers in China since 2014.

All eyes will now be on Japan (and firms Nikon and Tokyo Electron), as Tokyo is expected to issue an update on its chip equipment export policies as soon as this week, sources told Reuters.