Dutch responds to US China policy with a plan to curb exports of semiconductor technology

The Dutch government said Wednesday it plans new restrictions on semiconductor technology exports to protect national security, joining U.S. efforts to curb chip exports to China.

The US in October imposed sweeping export restrictions on shipments of US chip-making tools to China, but for the restrictions to be effective, other key suppliers in the Netherlands and Japan, which also oversee key chip-making technology, must agree. The allied countries have been in talks on the matter for several months.

Dutch Trade Minister Liesje Schreinemacher announced the decision in a letter to parliament, saying the restrictions would be introduced before the summer.

Her letter did not mention China, a key Dutch trading partner, nor ASML Holding NV ( ASML.AS ), Europe’s biggest technology company and a major supplier to semiconductor makers, but both will be affected. The specified one technology that will be affected is “DUV” lithography, the second most advanced machines that ASML sells to computer chip manufacturers.

“Because the Netherlands considers it necessary for national security reasons to get this technology under control as quickly as possible, the government will introduce a national control list,” the letter says.

ASML said in a response that it expects to have to apply for licenses to export the most advanced segment of its DUV machines, but that will not affect its financial guidance for 2023.

ASML dominates the market for lithography systems, multimillion-dollar machines that use powerful lasers to create the tiny circuits for computer chips.

The company expects sales in China to remain roughly flat at €2.2 billion in 2023 – suggesting a relative contraction as the company expects overall sales to grow by 25%. Major ASML customers such as Taiwan Semiconductor Manufacturing Co. and Intel is engaged in capacity expansions.

ASML has never sold its most advanced “EUV” machines to customers in China, and the bulk of DUV sales in China go to relatively less advanced chip manufacturers. The biggest South Korean customers, Samsung and SK Hynix, both have significant production capacity in China.

The Dutch announcement leaves big questions unanswered, including whether ASML will be able to service the more than €8 billion worth of DUV machines it has sold to customers in China since 2014.

Schreinemacher said the Dutch government had decided on measures “as carefully and precisely as possible … to avoid unnecessary disruption of value chains”.

“It is important for companies to know what they are facing and to have time to adapt to new rules,” she wrote.

Japan is expected to issue an update on its chip export policies as soon as this week.

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