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Netherlands follows U.S. with semiconductor export restrictions

TechnologyNetherlands follows U.S. with semiconductor export restrictions

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Netherlands Prime Minister Mark Rutte speaks with U.S. President Joe Biden, on June 29, 2022. The U.S. has been putting pressure on the Netherlands to block exports to China of high-tech semiconductor equipment.

Susan Walsh | AFP | Getty Images

The Netherlands on Friday announced new export restrictions on advanced semiconductor equipment amid U.S. pressure to cut China off from key chipmaking tools.

Companies in the Netherlands will need to apply for a license to export certain advanced semiconductor manufacturing equipment overseas, the Dutch government said, under rules that will come into effect on Sept. 1.

The Netherlands is home to ASML, one of the most important semiconductor companies in the world. ASML makes machinery that is required to produce the most advanced chips.

ASML shares were down 1.5% on Friday.

Last October, the U.S. introduced sweeping rules aiming to cut off exports of key chips and semiconductor tools to China, a move analysts said could hobble Beijing’s ambitions to boost its domestic technology. Since then, the U.S. has been ramping up pressure on key chipmaking nations and allies like the Netherlands and Japan, to introduce export restrictions of their own.

Because of ASML’s critical role in advanced chips, Washington has sought to get the Netherlands on side. The Dutch government was on the fence but in March laid out restrictions on the export of advanced semiconductor equipment. Friday’s announcement finalizes those rules and gives more clarity around what can and can’t be exported.

The law does not single out any country nor does it name ASML explicitly.

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The Dutch government said the rules apply to a “number of very specific technologies for the development and manufacture of advanced semiconductors,” that could potentially be used in places like military applications.

“We’ve taken this step on national security grounds. It’s good for the companies that will be impacted to know what they can expect. This will give them the time they need to adapt to the new rules,” Dutch Trade Minister Liesje Schreinemacher said in a statement.

ASML caught in the middle

ASML’s machines are used by advanced chip manufacturers like Taiwan Semiconductor Manufacturing Co. There are two key tools it makes.

The first is a so-called immersion deep ultraviolet (DUV) lithography machine, which is used to manufacture memory chips. These chips are used in a plethora of devices, from smartphones to laptops and servers, and could ultimately be used for artificial intelligence applications. 

The second is called an extreme ultraviolet (EUV) lithography machine which is used to make more advanced chips.

ASML said it will now need to apply for a license to export its most advanced immersion DUV lithography systems, called the TWINSCAN NXT:2000i and subsequent tools.

The Dutch government has used a different set of rules to restrict exports of ASML’s EUV machines since 2018. EUV exports however will now come under the law that comes into effect in September.

ASML said it can start submitting export licenses before the law comes into effect and the government will grant or deny these applications on a case-by-case basis.

The company added that it does not expect the measures announced on Friday to have a material impact on its 2023 financial outlook.

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China responds

The Chinese Embassy in the Netherlands called the latest law from the Dutch government “an abuse of export control measures and seriously disrupted free trade and international trade rules.”

“We call on the Dutch side to bear in mind the larger interest of safeguarding international trade rules and bilateral economic and trade cooperation, immediately correct its wrongdoings,” the embassy statement said.

The embassy said it is ready to “work with the Dutch side to address the issue based on the principle of mutual benefit, so as to jointly promote the healthy development of Sino-Dutch economic and trade relations.”

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