The Dutch ASML company is a focal point of high-tech competition between China and the United States. Although China has made some breakthroughs in the chip manufacturing process, it is not yet able to fully produce advanced lithography machines in the short term, and the existing lithography machines also need ASML to provide after-sales maintenance services. The United States not only wants to prevent the upgrading of China's chip industry, but also hopes that it has complete chip R&D and production capacity, and moves the chip supply chain distributed around the world to the United States. In this process, ASML is both the focus of competition and the object of restriction. The United States has always wanted ASML to move to the United States and at the same time completely cut off commercial relations with China.
Due to political pressure from the United States, the Dutch government was forced to announce that it would prohibit ASML from delivering the lithography machines it had ordered to China, and the after-sales work of the delivered lithography machines had not been completely interrupted, which became a new target for the U.S. government. Recently, the Biden administration has been pressuring the Netherlands to stop providing after-sales services for lithography machines to Chinese users. On April 17, Peter Wennink, president of ASML, publicly stated that there are no restrictions on after-sales service in China, and "nothing can prevent us from providing after-sales service to China." Such a hard statement makes people feel a little surprised. In order to pursue the so-called "small courtyard and high wall" policy, the United States has taken a very tough attitude. The United States not only forced TSMC and Samsung to set up factories in the United States and adopt the most advanced manufacturing processes, but also organized the so-called "chip quadripartite", requiring Japan, South Korea, the Netherlands, Taiwan and other relevant parties not to transfer new chip technology to Chinese mainland. ASML's default on exports to China is also the result of political pressure. So, did today's Dutch government and ASML eat the bear's heart and leopard gall?
Such a statement may be the result of a combination of two factors.
First of all, the Chinese mainland market occupies an increasingly important position in ASML's business. In the first quarter of this year, Chinese mainland accounted for 49% of ASML's revenue, Taiwan accounted for 6% and South Korea accounted for 19%. Lithography machines, like other large and complex equipment, require a high level of after-sales support such as maintenance and repair, and after-sales revenue accounts for more than a quarter of ASML's profits. Abandoning the maintenance market in Chinese mainland is to cut meat on ASML. If the U.S. government does not provide financial compensation, how can neither the Dutch government nor ASML accept it?
Second, the United States has exposed the essence of paper tigers in the war in Ukraine and the Palestinian-Israeli conflict. This is no longer the super-empire that holds the power of life and death in Europe. In the ten months since the end of last year, the US government has not even been able to come up with $60 billion in aid to Ukraine. In order to seek partisan compromise, Speaker of the US House of Representatives Johnson had to come up with a bizarre plan, claiming that three-quarters of the $60 billion in aid to Ukraine would be spent in the United States, not Zelensky. But even so, a group of Republican lawmakers refused to accept it. A political storm may be just around the corner. Although the United States is not without this money, its internal strife has already decided, the national will of the United States is in chaos, and if European countries seek independence, the United States may not be able to do anything. German Chancellor Olaf Scholz's just-completed trip to China proved this point. Germany can, why can't the Netherlands?
Although ASML is registered in the Netherlands, it concentrates the scientific and industrial achievements of several countries. Among them, a century-old store such as Zeiss in Germany is indispensable. For ASML's decision-making, the Dutch government must consult with relevant countries and relevant enterprises. If the outcome of the discussion is that this can be done, then why should the Dutch government suffocate the hen that lays the golden eggs?
It is important to note that China is not waiting for the fruits to fall into its own hands. The change in attitude between the Dutch government and ASML is largely due to the great results achieved in China's self-developed chip production capacity. Since Trump sanctioned Huawei, the Chinese government and business community have invested heavily in the chip supply chain, and more than one company is struggling at almost every bottleneck. In the first quarter of 2024, chip production in Chinese mainland increased by 40% quarter-on-quarter, and the global mature process market is about to be occupied by China, accounting for about 76% of all chip sales. Such a market share, on the one hand, can provide positive income for existing chip companies and feed back R&D, and on the other hand, it can encourage greater investment to enter.
Although the chip industry is extremely technically difficult, it is called "reinventing the entire human civilization" by the Americans, but the Chinese are not unable to do it. No matter what kind of lithography machine or other chip equipment, if you invest enough time and money, you can always do it. ASML recognized the problem a few years ago, and only the Biden administration refused to throw in the towel. Now that the victory of China's chip industry is completely localized, ASML is not tied to the chariot of the United States and sinks, it is better to be a good person now and not be completely thrown out of the Chinese chip industry market. And insisting on after-sales service is an exploratory step. The so-called person who knows the times is Junjie, and I hope that ASML and the Dutch government can really be Junjie.