Europe’s Most Valuable Tech Company Tries To Avoid the Chip War
An anonymous reader quotes a report from Bloomberg: As the US escalates its campaign to undermine the Chinese semiconductor industry, Europe is trying — with some success — to avoid becoming collateral damage. At the center of the maneuvering is ASML, the Dutch manufacturer of chipmaking equipment and Europe’s most valuable tech company. It’s one of the very few producers of the sophisticated lithography machines needed to make midgrade semiconductors, and the only manufacturer of the equipment needed to make the most cutting-edge chips. That puts ASML in the spotlight for policymakers. ASML has never sold its extreme ultraviolet lithography machines, or EUVs, to Chinese clients. The Biden administration, as part of its attempt to keep China from developing the capability to make advanced semiconductors, has been trying to push the Dutch government to withhold ASML’s older machines called immersion deep ultraviolet lithography machines, or DUVs, that can be used in combination with other technology to make advanced chips.
The European Commission, as well as the Dutch and German governments, have undertaken a coordinated lobbying campaign to oppose restrictions on a critical European company while US competitors continue to do business with Chinese companies, according to officials who spoke under the condition of anonymity because the talks are sensitive. They’ve argued in part that such restrictions are now pointless given that ASML, which generated 15% of its revenue in China last year, has already sold many of these machines to Chinese companies. When the US did push ahead in early October with more severe restrictions against doing business in China, its specific policies came as a relief to ASML and its political supporters. ASML wasn’t hit directly by the new restrictions, which did make it harder for its US peers, such as Applied Materials and Lam Research, to sell advanced chip gear to China. Both companies warned investors that the new restrictions would significantly affect their financial performance.
The US Department of Commerce, which is responsible for the majority of rulemaking and enforcement, won’t comment directly on specific companies or its negotiations with other governments. ASML is not an American company, limiting the US’s power over its operations. But it commonly uses parts from the US, which gives Washington a degree of leverage. In the past, export controls have applied to products when at least 25% of their components are sourced from the US. But senior US officials now say products that contain any US components or intellectual property could be subjected to Washington’s export approval process. Such a broad interpretation of the rules would be difficult for a company like ASML to work around. “Europeans feared the new US policy would include provisions affecting immersion DUVs,” adds Bloomberg. According to SML’s chief executive officer, Peter Wennink, the company’s initial assessment is that the new restrictions don’t apply to ASML’s products shipped out of the Netherlands. Roger Dassen, the chief financial officer, also said the direct impact is fairly limited, thanks to “the fact that we are a European company with limited US technology in it.” However, Bloomberg notes ASML’s shares “dropped as much as 19% in the days after the Oct. 7 announcement, although they partially recovered after it posted strong earnings.”
“The US runs the risk of setting off a confrontation with Europe if it chooses to go ahead with new restrictions on immersion DUV machines,” concludes the report. “It’s unclear what chance officials have to convince their Dutch counterparts to impose additional restrictions on DUV sales, but there’s little doubt the two allies aren’t yet on the same page. China is the Netherlands’s third-biggest trading partner after Germany and Belgium.”