US To Urge Holland To Halt ASML Servicing Tools For China

The United States is not easing up on the pressure on Beijing, after the Biden Administration explores a new avenue to restrict China’s chip manufacturing ambitions.

Reuters reported, citing two people familiar with the matter, that the Biden Administration plans next week to press the Netherlands to stop its top chip equipment maker ASML from servicing some tools in China.

The US earlier this week had tightened its export restrictions of AI to China, after new rules export came into force.

Export restrictions

In October 2022 the US banned the export of the A100 and more powerful H100 chips to mainland China and Hong Kong.

Then in October 2023 the US also banned export of the slower A800 and H800, which had been specifically developed for sale to China.

Then new rules have come into force that clarify, for example, restrictions on chip shipments to China also apply to laptops containing those chips.

The Commerce Department, which oversees export controls, has said it plans to continue updating its restrictions on technology shipments to China as it seeks to bolster and fine-tune the measures.

ASML pressure

Now Reuters has reported that the US is seeking to pressure the Dutch to stop iASML from servicing some tools in China.

It noted that Alan Estevez, the US export policy chief, is scheduled to meet in the Netherlands next Monday with officials from the Dutch government and ASML Holding NV to discuss the servicing contracts, the people said.

Washington may also be seeking to add to a list of Chinese chipmaking factories restricted from receiving Dutch equipment as part of the discussions, one of the people told Reuters.

The Dutch Foreign Ministry confirmed the upcoming meeting but did not elaborate on which topics would be on the agenda.

“The Netherlands always has good discussions with our partners. The meeting of officials on Monday is one example of that,” the Ministry told Reuters.

The Commerce Department and ASML declined to comment, and the Chinese Embassy in Washington did not immediately respond to a request for comment.

Restrictions on servicing ASML machines could be painful for Beijing, given the large and expensive tools require constant maintenance. China was ASML’s second-largest market by sales last year (29 percent), after Taiwan.

Cool relations

Beijing has already lashed out at the toughens export controls from US.

During his state visit to Beijing last week, Dutch Prime Minister Mark Rutte personally discussed a recent incident of cyber espionage, which the Netherlands directly blamed on the Chinese state, during talks with President Xi Jinping.

However Chinese President Xi told the Dutch Prime Minister that no force can stop the pace of China’s technological progress.

“Creating scientific and technological barriers and severing industrial and supply chains will only lead to division and confrontation,” Xi reportedly said last week.

On Tuesday this week President Joe Biden and Xi Jinping held a candid telephone call (the first since last November), in which Biden warned Xi about Taiwan and South China Sea, and Chinese support for Russia in its invasion of Ukraine, the Financial Times reported.

China’s Xi reportedly told Biden that relations had stabilised since their meeting in San Francisco but that there were also rising “negative factors”.

The Chinese President reportedly cited US sanctions designed to “suppress” Chinese technological development and warned that Beijing was “not going to sit back and watch” without reacting.

Dutch leverage?

Meanwhile it remains to be seen how much leverage the Dutch government has over ASML, which is Holland’s largest company.

ASML had recently shocked the Dutch government, after CEO Peter Wennink went public with complaints about domestic Dutch policy, including plans to end a tax break for skilled migrants which would make it harder for ASML to hire vital staff.

ASML also reportedly said the Dutch government has failed to invest properly to improve infrastructure in the Eindhoven area, from highways to housing to electrical grid improvements.

The Dutch government has taken note, especially after Shell and Unilever moved their headquarters to London after the Dutch government in 2018 was forced to renege on a promise to scrap a dividend withholding tax.

The Dutch government then announced it would spend 2.5 billion euros ($2.7 billion) “to strengthen business climate for chip industry in Brainport Eindhoven.”

The money will be used to improve transport and other infrastructure in Eindhoven, and it hopes to convince ASML not to move its operations abroad.