Dutch Prime Minister's visit to China, 450 lithography machines, 215.3 billion yuan: ASML is inseparable from China
Text/Wang Xinxi
It was announced that Dutch Prime Minister Rutte would visit China soon, which was the first time that his prime minister visited China in five years, and the industry was most concerned about the issue of lithography machines. The Prime Minister of the Netherlands has stated that he will not apply export control measures to a specific country and will try to reduce the impact of export restrictions.
In 2023, ASML sold 450 lithography machines to China, a 50% increase from 2022 shipments, and about 29% of its total revenue came from the mainland. But now that the new ban comes into effect in 2024 and the first quarter is coming to an end, the drop in sluggish sales has made the Netherlands aware of the seriousness of the problem.
As we all know, ASML is the unsubversible king in the field of lithography machines, although Nikon and Canon in Japan can also produce lithography machines, but in the field of EUV lithography machines, which are mainly used for advanced processes of 7nm and below, ASML is the only supplier in the world.
But at the same time, ASML is a vendor that can't control its own destiny. Its technology comes from different countries, the light source is from the United States, the mirror is from Germany, and the composite material is from Japan. The same is true for its shareholders, ASML's decision to supply lithography machines is deeply influenced by American capital, and ASML uses a large number of American technology in the production of lithography machines, so ASML can only follow the American decision.
As early as 2019, the Netherlands responded to the "call" of the United States and carried out export controls on lithography machines in China, and all EUV series lithography machines were prohibited from being exported to China, and only some low-end DUV lithography machines were allowed to be sold to China.
In 2024, the latest export control regulations of the Netherlands and the United States are already in force. In 2024, ASML will not obtain an export license to ship NXT:2000i and above immersion equipment to China, and before that, ASML urgently applied to the United States for a four-month restriction exemption period to urgently release lithography equipment and step up shipments to China.
According to the data, ASML's total shipments of lithography machines in 2023 will reach 450 units.
But it is clear that the Netherlands is underestimating the impact of sales in the Chinese market. According to the data, ASML received only 3 orders for EUV lithography equipment in a quarter, and the total equipment repurchase plummeted by 89.7% year-on-year.
This may have made the Netherlands realize that ASML is inseparable from China at all.
Behind the relocation to France, ASML's worries and breakthrough ideas
At present, ASML is facing a slowdown in chip demand, a general market environment, and difficulties in internal policies and talents. Some time ago, there were rumors that ASML was going to relocate, because of the "anti-immigration policy" in the Netherlands - 40% of ASML's employees are non-Dutch nationals, and there are also a large number of international students in the R&D part.
Earlier this year, ASML's CEO, Wennink, issued a warning to the Netherlands. "The impact of labor constraints will be widespread and far-reaching," he said. If we can't find enough good talent in the Netherlands, then we may need to look for areas with more potential for development. ”
The potential region he is talking about is France.
Why did they move to France? The underlying reason may lie in the fact that the lithography machine industry is tied to the interests of France, and the influence of France is used to promote the relaxation of US control measures. After all, the departure of ASML may be accompanied by the transfer of technology and intellectual property, which may have a positive impact on the semiconductor industry in the destination country or region, and improve the technical level of the local industry.
Therefore, moving to France means a major benefit for France, which is a P5 country with independent economic and political leadership, and ASML's products are subject to export control regulations in the Netherlands, and moving to France may affect the export licensing and sanctions policies for its products.
The idea of the Netherlands may be to pull France as an ally of interests, and lead other EU forces to negotiate with the United States, so as to continue to export more models of lithography machines to China and increase sales and profits.
China is one of ASML's main sales markets, and the Chinese market is becoming increasingly important to the Netherlands, and ASML's previous financial report showed that Chinese mainland is usually ASML's third largest market, replacing South Korea to second place last year. ASML's sales to Chinese mainland hit an all-time high last year. The growth in Chinese demand has helped offset the impact of the global chip industry slowdown on ASML.
At the same time, Chinese mainland accounted for 39% of sales in the fourth quarter of last year, becoming ASML's largest market in the quarter.
Now that ASML is considering moving to France and its prime minister's visit to China, it is clear that they are pinning their hopes on continuing to sustain sales growth in the Chinese market. But in fact, China has begun to sell high-end mobile phones using domestic chips in the third quarter of last year, judging from the information of all parties, China's chips have broken through the 7nm process, so that the Netherlands has a sense of crisis, and the Netherlands may realize that the lithography machine may fall more than expected.
At the end of last year, Allen Estevez, the undersecretary of the U.S. Department of Commerce for industry and security, said in an interview with Nikkei Asia in Tokyo that AMAT, LAM, KLA no longer sell new manufacturing equipment and testing instruments, and have also cut off supply services to China.
To put it simply, the other party wants to get stuck in the neck from the maintenance equipment, and is also putting pressure on ASML to interrupt the after-sales maintenance and parts replacement services of the lithography equipment we have purchased, trying to turn the existing lithography equipment in our hands into a pile of scrap metal.
If ASML wants to stop providing after-sales service and providing parts at the request of the United States, this breach of contract will inevitably affect the sales of lithography machines in the Chinese market in the future, and at the same time force China to further promote independent research and development, and take new countermeasures, which will have a great impact.
Therefore, Reuters said that the outgoing Rutte will discuss with the Chinese side whether the Dutch lithography giant ASML can continue to provide after-sales service to Chinese customers.
The Dutch lithography machine needs China to save the field, but China also needs to save itself
This may be a step by the Netherlands to show goodwill and ease relations with China.
With the continuous improvement of China's chip manufacturing technology, the sales pressure of Dutch lithography machines will become more and more intense, and the Netherlands knows that it cannot get rid of US export controls in key technologies, but it is also worried about China's possible further countermeasures in the future.
As a reciprocal countermeasure, China introduced export controls on gallium and germanium last year, according to the "Korea Economy" report, gallium is a necessary material for future semiconductor research and development and OLED displays, and germanium is used in the production of key gases in the semiconductor industry. China's export controls on gallium and germanium have shaken the foundation of South Korea's semiconductors.
In fact, China's export control of gallium and germanium also has a great impact on the Netherlands. Despite its well-developed semiconductor industry, the Netherlands relies on imports for almost all minor metals such as gallium and germanium. The United States is not short of these mineral resources, and whether it is a middleman or a second-hand dealer, they can always find a way to sell these mineral resources to the Netherlands, but it is obvious that the cost of obtaining these mineral resources in the Netherlands will increase exponentially, and it will also greatly weaken the product profits, sales and comprehensive competitiveness of its semiconductor industry.
While the industry is being deprived of profits, the bigger danger is that the positive cycle of R&D is broken, and Anderson, chairman of ASML's supervisory board, said that the company is facing damaging constraints that could hurt ASML's R&D budget in the long run. Its talent is also facing a gap, and China's domestic chip industry and lithography machine industry are undergoing subtle changes, and a large number of semiconductor talents are flowing to China.
The Dutch Prime Minister's visit to China, trying to break the further restrictions of the United States, in the past year, China set a record of 450 lithography machines, 215.3 billion yuan, so that ASML is still reminiscent, is suffering from the ban before and after the order gap in the Netherlands realized that lithography machines are inseparable from China, of course, for us, can no longer take the old road of "make is better than buy". With the breakthrough of China's semiconductors, China has already given up illusions, China lacks time, the ultimate goal or the development of a new generation of gallium nitride-based semiconductor industry, to win the semiconductor competition, this possibility or just in the current export dilemma and the current situation of ASML to give the opportunity. We'll see.
Author: Wang Xinxi, Senior Reviewer of TMT This article is not reproduced without permission