In a significant move aimed at slowing down China’s technological advancement, the U.S. has imposed strict controls on the global export of chip-making machinery to the Asian giant. The decision, announced on Friday, is expected to considerably disrupt China’s ambitions to establish its own chip-making industry.
The U.S. now requires global firms to secure a special license for exporting certain types of chip-making machines to China. These machines are critical for developing complex circuitry on computer chips and are central to China’s aspirations in the semiconductor sector. However, China currently lacks the technology to manufacture these advanced machines domestically.
The new regulations specifically halt shipments of machines using deep ultraviolet (DUV) technology, predominantly produced by Dutch firm ASML. Despite previous disagreements with export restrictions, ASML, under CEO Peter Wennink, has agreed to comply with these new rules.
ASML’s technology has been instrumental in driving global computing power and gives the U.S. and its allies a strategic advantage over China in turning technological advancements into military benefits. However, this U.S. move is causing tensions within alliances, particularly with Europe. Dutch foreign trade minister Liesje Schreinemacher stated that while the Netherlands shares U.S. security concerns, each country ultimately determines its own export restrictions.
Interestingly, Huawei recently introduced a smartphone equipped with a Chinese-made chip featuring transistor dimensions rated at seven nanometers. Analysts speculate this chip was produced by China’s Semiconductor Manufacturing International Corporation (SMIC) utilizing ASML’s machinery.
Chinese chip-making equipment still lags several years behind key suppliers such as Applied Materials (NASDAQ:) and Lam Research (NASDAQ:) in the U.S., and Tokyo Electron and Canon in Japan. Gregory C. Allen from the Center for Strategic and International Studies noted that the new export control rules had been planned long before the Huawei announcement but said this development “helped leaders throughout the U.S. government understand that there was no more time to waste.”
ASML’s CFO, Roger Dassen, revealed that most of the orders ASML was completing this year were placed in 2022 or earlier. Analysts at TD Cowen estimated that ASML’s China sales would reach 5.5 billion euros this year, more than double last year’s total. Joanne Chiao, a semiconductor analyst at TrendForce, emphasized the necessity of regular software and maintenance support for these machines to continue producing chips.
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