They’re sleek white boxes, roughly the size of large cargo vans, and they’re now at the center of the US-China technology conflict.
As the United States tries to slow China’s progress toward technological advancements that could help its military, the complex lithography machines that print complex circuitry onto computer chips have become a significant hurdle.
The machines are at the center of China’s efforts to develop its chip-manufacturing industry, but China does not yet have the technology to make them, at least in their most advanced forms. This week, U.S. officials took steps to halt China’s progress toward that goal and bar companies globally from shipping additional types of chip-making machines to China unless they receive a special license from the U.S. government. Happens.
The move could be a significant blow to China’s chip-making ambitions. It is also an unusual flexibility of American regulatory power. US officials took the stance that they could regulate devices manufactured outside the United States if they contained only a single American-made part.
The decision gives U.S. officials new influence over companies in the Netherlands and Japan, where some of the most advanced chip machinery is made. In particular, U.S. regulations will now block shipments of some machines that use deep ultraviolet, or DUV, technology, primarily made by Dutch firm ASML, which dominates the lithography market.
Vera Kranenberg, a China researcher at the Clingendael Institute, a Dutch think tank, said that while ASML has made clear it will abide by the rules, the company was already violating earlier rules, which allowed it to import more sophisticated lithography into China. The machine was stopped from exporting. , “They are definitely not happy with the export controls,” he said.
After getting involved in geopolitics again, ASML has been cautious in its response and said in a statement this week that it complies with all laws and regulations in the countries where it operates. Chief Executive Officer Peter Wennink said it was “just a handful” of Chinese chip factories where the company would not be able to ship some equipment. But “it’s still our sales in 2023 that won’t be in 2024,” he said.
In a statement, Liege Schreinmacher, the Dutch foreign trade minister, said the Netherlands shares US security concerns and constantly exchanges information with the United States, but “ultimately, every country decides for itself which Export restrictions have to be imposed.” He pointed to more permissive restrictions announced by the Dutch government in June.
A spokesman for the US Commerce Department declined to comment.
ASML’s technology has enabled a leap in global computing power. The increasing precision of its machines – which contain thousands of components and cost up to hundreds of millions of dollars each – has allowed the circuitry on chips to become progressively smaller, letting companies pack more computing power into a smaller piece of silicon. Is.
Technology has also given the United States and its allies an important source of leverage over China, as governments compete to convert technological advantage into military advantage. Although Beijing is pouring money into the semiconductor industry, Chinese chip-making equipment is years behind the strength of ASML and other major machine suppliers, including Applied Materials and Lam Research in the United States and Tokyo Electron and Canon in Japan.
But US efforts to weaponize this technological advantage against China are creating tensions in alliances. In Europe, government officials increasingly agree with the United States that China poses a geopolitical and economic threat. But they are still wary of hurting their own companies by locking them out of China, one of the world’s largest and most vibrant tech markets.
Dutch technology, in particular, has been the focus of a multiyear pressure campaign by the United States. In 2019, the Trump administration persuaded the Dutch to block shipments to China of ASML’s most cutting-edge machine, which uses extreme ultraviolet technology.
After months of diplomatic pressure from the Biden administration, the governments of the Netherlands and Japan agreed in January to also independently curb the sale of some deep ultraviolet lithography machines and other types of advanced chip-making equipment to China.
The United States and its allies have viewed the sale of deep ultraviolet lithography machines as a national security risk. The chips they produce are significantly less advanced than those produced by the state-of-the-art machines that now power the latest smartphones, supercomputers and AI models.
But that position was tested this summer, when a Chinese firm used ASML’s deep ultraviolet lithography technology along with other advanced machines to overcome a technical barrier that U.S. authorities had tried to prevent from reaching China. There was hope.
In August, Chinese telecom giant Huawei unexpectedly released a new smartphone featuring a Chinese-made chip with transistor dimensions of seven nanometers, just a few generations behind the latest chips made in Taiwan. Analysts have concluded that the chip was made by China’s Semiconductor Manufacturing International Corporation using Dutch deep ultraviolet lithography machinery.
Gregory C. Allen, a technology expert at the Center for Strategic and International Studies, a Washington think tank, said the new export control rules were in the works long before Huawei’s announcement. But, he said, this development “helped leaders throughout the US government understand that there is no more time to waste and that updated controls are urgently needed.”
Mr. Allen said controls would not immediately hurt China’s most advanced chip-makers because they already stockpiled much of the advanced machinery. But it would “dramatically restrict” their ability to manufacture the most advanced types of semiconductors, such as seven-nanometer chips, he said.
At present, ASML is still doing brisk business with China. In its earnings report this week, ASML said China sales rose to 46 percent of the company’s global total in the third quarter, well above historical levels.
TD Cowen analysts expect ASML’s China sales to reach 5.5 billion euros (about $5.8 billion) this year, more than double last year’s total. He estimated that next year, new export controls could cut the company’s China revenues by 10 to 15 percent.
Roger Dessen, ASML’s chief financial officer, said in the earnings call that most of the orders ASML was fulfilling this year were placed in 2022 or a year beyond that, and were largely for machines that were slightly older types. Used to make chips.
All shipments were “within the limits of export regulation,” Mr. Dessen said.
For machines facing new US sanctions, the Dutch company will now be barred from supplying replacement parts and helping service those systems. This would mean that Chinese companies are likely to have manufacturing problems at some point.
These extremely expensive machines depend on regular software and maintenance support to keep producing chips, said Joan Chiao, semiconductor analyst at market research firm TrendForce.
ASML is not the only equipment supplier to be caught up in the latest sanctions. Other types of advanced machines needed to produce the most advanced chips, such as machines from US companies Applied Materials and Lam Research, are detailed in the latest restrictions.
Lam said in a conference call on Wednesday that revenue from China rose 48 percent in the first fiscal quarter as companies stocked up on machines to make both mature chips and advanced products. It was already estimated that the ban on sales to China would reduce revenues by about $2 billion this year; Officials said the expanded rules issued this week would not materially change that estimate.
An Applied Materials spokesperson said the company is still reviewing the new rules to assess their potential impact.
John Liu Contributed reporting from Seoul.
