Dutch to restrict semiconductor tech exports to China, joining US effort

The Netherlands’ government on Wednesday said it plans new restrictions on exports of semiconductor technology to protect national security, joining the U.S. effort to curb chip exports to China.

The announcement marked the first concrete move by the Dutch, who oversee essential chipmaking technology, toward adopting rules urged by Washington to hobble China’s chipmaking industry and slow its military advances.

The U.S. in October imposed sweeping export restrictions on shipments of American chipmaking tools to China, but for the restrictions to be effective it needs other key suppliers in the Netherlands and Japan, who produce key chipmaking technology, to agree. The allied countries have been in talks on the matter for months.

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

Her letter did not name China, a key Dutch trading partner, nor did it name ASML Holding NV ASML.AS, Europe’s largest tech firm and a major supplier to semiconductor manufacturers, but both will be affected. It 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 said.

A White House representative did not immediately respond to a request for comment.

ASML said in a response it expects to have to apply for licenses to export the most advanced segment among its DUV machines, but that would not impact its 2023 financial guidance.

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

The company expects sales in China to remain about flat at 2.2 billion euros in 2023 – implying relative shrinkage as the company expects overall sales to grow by 25%. Major ASML customers such as Taiwan Semiconductor Manufacturing Co 2330.TW and Intel Corp INTC.O are engaged in capacity expansions.

ASML has never sold its most advanced “EUV” machines to customers in China, and the bulk of its “DUV” sales in China go to relatively less advanced chipmakers. Its biggest South Korean customers, Samsung and SK Hynix 000660.KS both have significant manufacturing capacity in China.

The Dutch announcement leaves major questions unanswered, including 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.

Schreinemacher said the Dutch government had decided on measures “as carefully and precisely as possible … to avoid unnecessary disruption of value chains.”

“It is for companies of importance to know what they are facing and to have time to adjust to new rules,” she wrote.

Japan is expected to issue an update on its chip equipment export policies as soon as this week, sources said.

“For national security reasons we constantly review export rules, but it doesn’t mean we have decided anything at this point,” Japan’s Minister for Economy, Trade and Industry (METI) Yasutoshi Nishimura said in parliament when asked about possible restrictions.

A METI official involved in export controls told Reuters there was no plan to announce any changes on Thursday or Friday. The official, who spoke on condition of anonymity, was not authorised to talk to media.

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