US, Japan, & Netherlands Impose Export Controls on Advanced Chip Technology, Targeting China’s Domestic Chip Industry
The US, Japan, and the Netherlands have reached an agreement to restrict the export of advanced chip technology to China. The goal of the agreement is to prevent China from developing its own domestic chip industry, as the three countries dominate the production of semiconductor manufacturing equipment.
According to Bloomberg, the agreement was reached on Friday in Washington and will involve the Netherlands, Japan, and the US imposing export controls on companies that produce lithography systems, such as ASML Holding NV, Nikon Corp., and Tokyo Electron Ltd. The restrictions are expected to target some of ASML's so-called deep ultraviolet (DUV) lithography machines, which could further tighten ASML's sales to China.
The US has long wanted to restrict the sale of high-end chip technology to China to prevent the country from using its advanced chips to make increasingly sophisticated weapons. The agreement will extend some export controls the US adopted in October to companies based in the two allied nations.
ASML is the only company in the world that manufactures extreme ultraviolet lithography (EUV) machines, which are needed for the most advanced production processes. However, there is currently a prohibition on supplying these machines to China. It seems that the prohibition will be extended to encompass even less sophisticated deep ultraviolet (DUV) lithography machines.
In response to the news, ASML said in a statement that its knowledge of the new rules was still limited, making it difficult to map out the medium and long-term financial, organizational and global industry-wide impact of new export control rules.
The agreement, which is aimed at undercutting Beijing’s ambitions to build its own domestic chip capabilities, could have far-reaching implications as it could cramp China’s home-grown chip industry, as there are few, if any, other sources for the sophisticated technologies required for modern semiconductor manufacturing.
Investors should be aware of the implications of this new agreement, as ASML is one of the world's largest manufacturers of semiconductor manufacturing equipment and its products are now subject to the new restrictions. The restrictions could have a negative impact on the company's financials, as well as the global industry as a whole.
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