Dutch Government Reclaims Control Over ASML Chipmaking Tools, Shifting Market Dynamics

Dutch Government Reasserts Export Control Over ASML Equipment

The Dutch government has announced an expansion of export licensing requirements for certain ASML Holding N.V. (NASDAQ: ASML) chipmaking tools, effectively retaking control from the United States and aligning its policy with that of the U.S. The U.S. had previously imposed unilateral regulations on these tools as part of its broader effort to restrict advanced technology access to Chinese chipmakers, aiming to limit contributions to China’s technological and military advancements.

ASML has stated that it anticipates no impact on earnings from this change in oversight, either for the current year or in the future. Following the announcement, shares of ASML, Europe's largest technology firm based in the Netherlands, experienced a 5.42% decline, trading at 681.00 euros as of 6 Sept, 5:38 pm GMT+2.

Dutch Trade Minister Reinette Klever, who made the announcement, cited safety concerns due to technological developments as the primary reason for the decision. She emphasized that the export of certain production machines now presents increased safety risks.

While the U.S. and Netherlands continue discussions on export policy, the decision made on Friday aims to ease tensions between the two governments. The tools affected are the ASML 1970i and 1980i DUV (Deep Ultraviolet) immersion lithography systems, which are positioned mid-range within ASML's product lineup.

Under pressure from the U.S., the Dutch government has historically restricted ASML from shipping its most advanced EUV (Extreme Ultraviolet) tools to Chinese clients. In September 2023, licensing requirements were introduced for the NXT:2000 series and higher DUV tools, and ASML warned Chinese customers not to expect deliveries of these tools starting in 2024. In October 2023, the U.S. independently began restricting ASML's shipment of the 1970i and 1980i models, citing the presence of U.S. components in these tools.

Concerns were raised in the Dutch parliament regarding national sovereignty, while ASML faced challenges managing the differing licensing requirements imposed by the U.S. and Netherlands. Recent updates to U.S. Department of Commerce export rules and corresponding Dutch regulations have incorporated similar language regarding lithography technology.

ASML’s DUV tools are integral to the creation of intricate chip circuitry. The interest in the 1980i and 1970i models is driven by the success of Chinese firms, such as Semiconductor Manufacturing International Corporation (SMIC), in producing advanced chips through a technique known as "multipatterning," where silicon wafers are processed multiple times with DUV tools.

At a recent event in New York, ASML CEO Christophe Fouquet highlighted that Chinese chipmakers could produce chips at 7nm, 5nm, and potentially 3nm technology levels using DUV tools, surpassing the limits imposed by U.S. restrictions. However, he noted that while this technique demonstrates engineering capability, it leads to diminishing yields and is economically unsustainable.