China Tells Dutch 'Be Impartial' After Chip Giant's Export Ban

China has criticised the Netherlands and called on its leaders to “be impartial” and “respect market principles” – after the Dutch government blocked to chip-machine maker ASML from exporting advanced equipment to Chinese companies.

Beijing’s response on Tuesday followed an announcement by the Dutch company that the Netherlands government stopped it from exporting its top-of-the-line chipmaking equipment.

ASML, based in Veldhoven, is the world’s leading supplier for the semiconductor industry. It said on Monday that shipments of certain lithography systems would be affected by the government’s move to partly revoke its export licence – which stems from updated export restrictions imposed by the United States.

ALSO SEE: China’s Factory Slump Deepens, Stimulus Pressure Grows

“A licence for the shipment of NXT:2050i and NXT:2100i lithography systems in 2023 has recently been partially revoked by the Dutch government, impacting a small number of customers in China,” the company said.

ASML dominates the global market for lithography systems, which use lasers to help create chip circuitry. Its shares dipped in early trade on Tuesday.

Asked about the Dutch government’s move, Chinese foreign ministry spokesman Wang Wenbin on Tuesday urged the Netherlands “to be impartial, respect market principles and the law, take practical actions to protect the common interests of both countries and their companies and maintain the stability of international supply chains.”

ASML did not specify which customers were due to receive the machines, but its customers in China include Semiconductor Manufacturing International Corporation (SMIC) and others, according to company disclosures.

SMIC and foundry peers Hua Hong, Nexchip Semiconductor, Wuhan Xinxin Integration Dianlu Manufacture and United Nova Technology did not respond to requests for comment.

Little impact on its financial outlook

The company said it does not expect the revocation or the latest US export control restrictions to have a material impact on its financial outlook for 2023.

In recent years, China has been ASML’s third-largest market after Taiwan and South Korea, but it was the biggest in the third quarter of 2023, with 46% of the company’s sales.

In October 2023, the Biden Administration announced new rules giving Washington the right to restrict the export of ASML’s “Twinscan NXT1930Di” machine if it contains any US parts.

Soon after, several Dutch lawmakers challenged the Netherlands’ Trade Minister on whether the United States had acted correctly in unilaterally imposing rules regulating the export to China of another ASML chipmaking machine.

“In recent discussions with the US government, ASML has obtained further clarification of the scope and impact of the US export control regulations,” the semiconductor equipment maker said in a statement.

“ASML is fully committed to comply with all applicable laws and regulations including export control legislation in the countries in which we operate.”

China has been striving to catch up in lithography as part of a massive government-directed effort to create a self-reliant semiconductor supply chain. Shanghai Micro Electronics Equipment (SMEE) is the country’s only known maker of lithography machines, though it is seen as well behind ASML and Japanese peers.

Last month, one of SMEE’s shareholders, Zhangjiang Group, announced that the company had successfully developed a 28nm lithography machine on its WeChat account in what would mark a breakthrough for the company and China. However it later retracted the post without specifying why.