US demands that chipmaking giant ASML Holding NV stop servicing some equipment it has sold to Chinese customers are a diplomatic and business headache for the Dutch government, but signs are it will continue to align with Washington on export restrictions.
Although Dutch Prime Minister Mark Rutte’s government is reluctant to make a blanket decision, its public statements and national security interests suggest it will be slow to approve Chinese maintenance requests in future and quick to deny them.
That would be a setback for China’s attempts to build up its domestic chip industry, because ASML gear is almost impossible to replace and will break down over time if not maintained.
Photo: Reuters
But it could also complicate efforts by Rutte’s government to stop ASML, the Netherlands’ biggest company, from moving operations abroad.
One emerging factor is Dutch security priorities, particularly support for Ukraine in its war against Russia.
Rutte, who is favored to become the next NATO secretary general, discussed ASML with Chinese President Xi Jinping (習近平) when they met in Beijing last week.
He said afterward that China’s support for Russia was a serious problem at a time when the Netherlands is arming Ukraine with F-16s.
"It is incredibly important that China understands any victory for Russia (in Ukraine) would pose an immediate threat" to both the Netherlands and Europe, Rutte said.
He declined to answer directly whether his government will deny licenses for ASML’s Chinese customers.
Xi told Chinese state media he had warned Rutte against "decoupling and breaking links" with China.
While Beijing says it is neutral on the Ukraine conflict, Xi has a strategic alliance with Russian President Vladimir Putin.
The Netherlands holds Russia responsible for the 2014 downing of Malaysia Flight 17 (MH17) over eastern Ukraine, which killed 198 Dutch citizens. It also houses and supports the Hague-based International Criminal Court which has issued a warrant for Putin’s arrest on war crimes charges.
Rutte called on China to do more to keep Russia from obtaining "dual-use goods" with both civilian and military applications — such as ASML’s machines and the chips they are used to make.
While his comments do not translate to a policy of presumptive denial for Chinese customers seeking ASML gear that falls under licensing rules, as US policy does, they do indicate the Dutch government’s likely starting point.
ASML declined to comment. It has previously said it complies with all export regulations.
European Parliament lawmaker Bart Groothuis said the Netherlands should determine export policy in concert with larger allies.
"It is much better for us to do that, regulate ASML, together with the US, or in the future it may be Europe, and I would say that is the best way forward," he said.
US President Joe Biden’s export policy chief Alan Estevez is expected to raise the servicing contracts at a meeting today with Dutch government officials and executives from ASML.
The Dutch government must weigh its response given fears of weakening US support for its security priorities, including Ukraine, especially if Donald Trump wins November’s presidential election.
"If the US role in NATO decreases, then probably also the leverage that the US has ... with regard to technology transfers to China will decrease," said Frans-Paul van der Putten of the Clingendael Institute, a Dutch think tank.
He said the Dutch see China as "the only country that has at least some kind of influence on Russia potentially."
The Dutch Foreign Ministry, which oversees exports, said on Thursday it would judge Chinese licensing requests the same way it does others: on a "case by case" basis, weighing the risks they might end up having undesired military uses.
But that will be difficult for Dutch officials to determine from afar, especially given Xi’s civil-military fusion policies.
For ASML, the damage from an uncertain number of license denials will be gradual and limited — maintenance is about 20 percent of its revenue and China is its third-biggest market after Taiwan and South Korea.
It has sold 10 billion euros (US$11 billion) of equipment to chipmakers in China over the past three years, much of which does not fall under any export restrictions. Some have also gone to plants in China with Western-allied owners, such as SK Hynix Inc and Taiwan Semiconductor Manufacturing Co (台積電).
Individual Chinese chipmakers or plants that are denied a license could be badly hurt, as ASML machines are essential for making chips and hard to replace.
Experts say, however, that Chinese chipmakers have shown surprising resilience to US-led sanctions so far and will continue to find ways to engineer around them in the future.
"The cutting-off of servicing is going to inexorably degrade the capabilities of that equipment. And so the manufacturer will be fighting a sort of rearguard action to keep those machines going as long as possible," US expert on China and semiconductors Paul Triolo said.
"The question is in the long term, what other workarounds are possible here?"
Restaurant chain Din Tai Fung (鼎泰豐) today announced it is to close 14 stores in northern China, completely exiting the market by the end of October. Beijing Hengtaifeng Catering Co (北京恆泰豐餐飲), which operates Din Tai Fung restaurants in northern China, said its 20-year operating license expires this year. As the board was unable to reach a consensus on continuing operations, its 14 restaurants in the region are to close by Oct. 31, it said. The company apologized for the inconvenience and disappointment the news would cause among its customers, and said it would provide compensation for its workers. “We continue to be optimistic about
EXPANDING: The European Commission has contributed 5 billion euros in state aid to TSMC’s 12-inch wafer fab in Dresden, Germany, which broke ground on Tuesday Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) on Saturday said that it has received a total of NT$62.5 billion (US$1.95 billion) in subsidies from China and Japan since 2022. In the first half of this year, TSMC received NT$7.96 billion in subsidies from China and Japan after receiving about NT$47.55 billion last year and obtaining NT$7.05 billion in 2022, financial data compiled by the world’s largest contract chipmaker showed. The company, which makes about 90 percent of the world’s high-end semiconductors, said the subsidies were used to finance its investments in Kumamoto, Japan, and Nanjing, China. TSMC owns a 12-inch wafer fab in
STRATEGIC SHIFT: Diversifying away from the volatile flat-panel industry, AUO aims to boost sales contribution from non-panel business to half of total revenue by 2027 AUO Corp (友達) yesterday said it has agreed to sell its idled manufacturing facility and land in Tainan to Micron Technology Inc for NT$7.4 billion (US$231.8 million) as the company shifts strategy to reduce the impact from the boom-and-bust flat-panel display industry. The company expects to book NT$4.17 billion in disposal gains from the sale, it said in a Taiwan Stock Exchange filing. The Tainan factory produced color filters used in monitors, notebook computers and flat-panel TVs before being shut down last year, as AUO sought to optimize its asset utilization. The company has been striving to diversify and broaden its business
Micron Technology Inc has reportedly set its sights on two facilities owned by flat-panel maker AUO Corp (友達) after Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) recently clinched a deal to buy a facility and equipment from Innolux Corp (群創), another major flat-panel maker. Micron, the world’s third-largest memorychip maker, is expected to purchase two AUO plants in Tainan to expand its advanced chip packaging and testing services and high-bandwidth memory production, local media reports said. The two plants were shut down in August last year and AUO is seeking to dispose of the facilities, the reports said. They are expected to cost Micron