US reportedly pushed ASML to cancel chipmaking kit for China early

Washington reportedly pressed chipmaking equipment giant ASML to cancel some deliveries to China ahead of updated restrictions coming into force, but the company itself is declining to confirm if this is the case.

The Dutch manufacturer is caught up in the "chip wars" between the US and China, as it makes some of the most advanced photolithography equipment in the world. It is the only current source for extreme ultraviolet (EUV) systems to produce chips at the smallest production nodes, for example.

However, these are already barred from export to China under existing export restrictions, and updated rules announced last year extended this to cover some of ASML's deep ultraviolet (DUV) lithography machines as well.

According to Bloomberg, ASML canceled shipments of some of these machines to China at the behest of the Biden administration before the new restrictions came into force this month. It claims that US officials asked the company to immediately halt already scheduled shipments, citing anonymous sources said to be familiar with the matter.

ASML is being somewhat cagey regarding this matter, as might be expected, as China has been a lucrative market for the company. According to some estimates, China was ASML's largest market after Taiwan and South Korea, but made up nearly half the company’s sales in the third quarter of 2023, as chipmakers in the country rushed to get new equipment before the drawbridge was pulled up.

In a statement, ASML said: "A license for the shipment of NXT:2050i and NXT:2100i lithography systems in 2023 has recently been partially revoked by the Dutch government, impacting a small number of customers in China."

The company previously said Dutch authorities had issued it with licenses to keep selling its DUV machines into China through to the end of 2023, after which it would have to halt sales.

But it appears that the relevant export licenses have been partially revoked by the Dutch government, "partially" because they had already been used to deliver some shipments to China during 2023, the company told us.

The closest to a smoking gun is this part of ASML's statement: "In recent discussions with the US government, ASML has obtained further clarification of the scope and impact of the US export control regulations. The latest US export rules (published October 17, 2023) impose restrictions on certain mid critical DUV immersion lithography systems for a limited number of advanced production facilities."

An ASML spokesperson told us that "for 2024 it is unlikely we will receive an export license to ship the NXT2000i (and subsequent versions) to Chinese customers."

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However, the company said that it did not expect the revocation of the export license or the latest US export control restrictions to have a material impact on its financial outlook for 2023. This is despite previous estimates indicating that the updated export restrictions might cost ASML about five percent of its annual revenue.

The export restrictions are all aimed at preventing China from getting its hands on the most advanced chip technology, for fears of what Beijing’s military might do with it. But despite these measures, China’s Huawei was able to unveil a new smartphone last year with a homemade system-on-chip built from a 7nm process, and it is also rumored to have a 5nm laptop chip. ®