The Netherlands is officially shot! Restrict the export of DUV lithography machines

Silicon news on March 9, local time on March 8, the Netherlands announced that it officially joined the United States in the semiconductor industry restrictions on China. Dutch Trade Minister Liesje Schreinemacher revealed in a letter to parliament that the Netherlands plans to impose new restrictions on semiconductor technology exports, which will be implemented by the summer.

Letter from Dutch Trade Minister Liesje Schreinemacher to Parliament

In the letter, Schreinemacher did not specify which semiconductor-related equipment would be affected, but stressed that the companies would have to apply for a license to export the technology, and that "restrictions will only include very high-spec systems that can make the smallest and most powerful chips, including some deep ultraviolet (DUV) lithography machines manufactured by ASML." ”

Dutch lithography giant ASML responded that it has not received a clear definition of a "very high-specification system" and that the move will not have a significant impact on the company's financial performance in 2023 or in the long term. However, due to the new regulations, ASML needs to apply for an export license to ship its DUV lithography machines.

▲ASML official response

DUV lithography machine is used to produce 28nm and more mature process chips, theoretically up to 7nm, the main suppliers are Dutch ASML, Japan Nikon, Japan Canon and so on. From the perspective of the scope defined by ASML, the new Dutch export restriction regulations may mainly involve the procurement of high-end DUV lithography machine models that can produce advanced process chips, and will not affect models before 2000i.

▲ASML DUV lithography machine model list (Source: ASML)

In October last year, the US government imposed restrictions on the export of chip-making tools to China, but for these restrictions to take effect, the consent of Dutch and Japanese suppliers with relevant key technologies is required, so since the beginning of January this year, the US government has been lobbying the Netherlands and Japan to reach an agreement to restrict the export of advanced chip-making tools to China.

This is also the first time the Netherlands has disclosed some details of the agreement, and Japan is rumored to update its chip export policy as soon as this week.

Ahead of more details of new export controls that the Netherlands and Japan have been heavily lobbied by the United States this week, ASML CEO Peter Wennink will speak at the company's headquarters in Veldhoven, the Netherlands.

1. To expand existing export controls, national control lists will be introduced

In the letter, Schreinemacher said that the Netherlands plays an important role in the global semiconductor industry chain, and given technological developments and geopolitical implications, it is necessary for the government to expand existing export controls on specific semiconductor manufacturing equipment.

Schreinemacher said the Dutch government had decided to take "the most prudent and precise measures possible... In order to avoid unnecessary disruption to the value chain, it is important for important companies to understand the problems they face and have time to adapt to the new rules".

The Netherlands will also regulate relevant technologies as quickly as possible on national security grounds, so the cabinet will introduce a national control list.

In addition, Schreinemacher plans to push for global control of advanced chip manufacturing at forums such as the Wassenaar Group, a group of developed countries that can set export restrictions on equipment used in military systems.

Second, the sale of DUV needs to apply for a license, and the performance has no impact for the time being

Although Schreinemacher did not explicitly mention China and ASML, the world's largest lithography machine giant, in the letter, both would be affected.

ASML occupies a vital position in the global chip supply chain and is the only company capable of manufacturing highly sophisticated extreme ultraviolet (EUV) lithography machines, which are the key equipment for the production of advanced chips.

ASML's more advanced EUV lithography machines have been banned from sale to China in 2019.

Today, due to upcoming regulations in the Netherlands, ASML needs to apply for an export license to ship its DUV lithography machines. ASML responded that the move will not have a significant impact on the company's financial performance in 2023 or in the long term.

What's more, the Dutch government's new export control measures only apply to "state-of-the-art" tools, but ASML has not yet received a clear definition of "state-of-the-art". As such, ASML interprets it as "critical immersion," defining it as a TWINSCAN NXT:2000 and subsequent immersion lithography system.

Wennink said he guards against intellectual property theft "more closely than ever." That's because the U.S. is increasingly imposing restrictions on China's acquisition of advanced chips and semiconductor equipment, which increases their risks when it comes to working safely.

At the same time, Wennink also warned governments not to fall into protectionism, arguing that the chip industry has made great progress for global society.

Conclusion: China and the Netherlands should jointly maintain the stability of the supply chain

ASML expects sales in China to remain around €2.2 billion in 2023, which also means that its sales have contracted relatively because its overall sales growth is likely to be around 25%.

The Dutch government's latest announcement reveals only some details, but leaves more important doubts about whether ASML will be able to continue servicing DUV lithography machines worth more than €8 billion sold to Chinese customers since 2014.

Regarding the news that the Netherlands has expanded the scope of ASML lithography machines banned from China from EUV lithography machines to DUV lithography machines, on January 30, Chinese Foreign Minister Qin Gang had a telephone conversation with Dutch Deputy Prime Minister and Foreign Minister Hukstra to exchange in-depth views on bilateral relations and other issues.

Qin Gang pointed out that "openness and pragmatism" is the biggest feature of China-Netherlands relations, and the two sides should jointly maintain the stability of the international industrial chain and supply chain, and maintain an open rather than divisive, orderly rather than chaotic international trade environment. Deputy Prime Minister and Foreign Minister of Hookstra said that the Netherlands is willing to promote the continuous development of the open and pragmatic comprehensive cooperative partnership between the two countries, and will continue to handle economic and trade affairs with China in a responsible manner.

Source: ASML official website, Dutch House of Representatives official website