Chinese president Xi Jinping has told visiting Dutch Prime Minister Mark Rutte that “no force” could stop his country from making technological progress.
“The Chinese people also have the right to legitimate development, and no force can stop the pace of China’s scientific and technological development and progress,” Xi was quoted as saying by state media CCTV, according to the Associated Press.
Xi also warned Rutte that cutting supply chains ‘will lead to division and confrontation’, amid the looming possibility that the Netherlands could give in to US pressure and implement stricter chip curbs targeting Beijing.
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“Decoupling and breaking links” leads nowhere, and cooperation is the only option, Xi told Rutte, who is on a two-day state visit to Beijing.
Xi also told Rutte he hoped that the Netherlands will provide a fair and transparent business environment for Chinese companies, Chinese state media said.
One of Xi’s top policy goals has been to help China build up its domestic chipmaking industry, spending billions on subsidies.
But Rutte’s visit to Beijing comes at a time when the US is doubling down on its allies – Japan, South Korea and the Netherlands – to restrict China’s access to advanced chips and chipmaking.
For the Dutch, this would mean tightening licensing rules the Rutte government imposed last year, especially those on chip equipment giant ASML.
ASML is the biggest supplier of lithography machines crucial to chipmaking, and its tools have become a flashpoint in the US-China “chip wars”.
The firm has never sold any of its most advanced tools – EUV machines – to China. At the start of this year, the Rutte government also revoked ASML’s licences to sell some less advanced ‘DUV’ machines to China.
Meanwhile, China spent a record amount of money stockpiling those chipmaking tools in 2023, spending as much as $7 billion on machines from ASML alone.
The US government is now urging the Rutte Administration to curtail ASML’s licenses to provide servicing and maintenance on chipmaking equipment it has already sold to China.
Licenses to service China equipment loom
Sooner or later, ASML must seek licences for equipment already in China that now falls under Dutch or US export rules. If licences are denied, or revoked, ASML’s tools would become impossible to operate within weeks.
That would be potentially devastating for its customers, which include China’s largest contract chipmaker SMIC.
SMIC, a US-sanctioned chipmaker has been using its stockpiled, less-advanced chipmaking tools to make expensive breakthroughs in chipmaking. The firm is said to have been behind the 7nm chips in smartphones from Huawei Technologies – another US sanctioned firm.
SMIC and Huawei are also reportedly working on mass producing new-generation 5nm chips, using the same stockpiled equipment.
Those developments are likely behind Washington’s latest push against ASML’s servicing licences.
ASML said it “has export licences in place to service the majority of its Chinese customers until December 31, 2024,” in an emailed answer to Reuters on questions about its machines that fall under export restrictions.
For some of its most advanced product lines “ASML has not received an export licence to continue servicing of these systems at some specific advanced logic fabs [in China] as of 1st November 2023,” the company added.
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Dutch vow to defend ASML interests
Ahead of Rutte’s visit, Dutch trade minister Geoffrey van Leeuwen had said that defending the interests of ASML was his “number one” priority.
Van Leeuwen is also visiting China and is expected to meet with Chinese Trade Minister Wang Wentao.
Last month, ASML warned in its annual report for 2023 that any further expansion of chip curbs targeting China would pose business risks for the firm. China’s record purchases made it ASML’s second-largest market in 2023.
ASML has said it expects to continue to have significant sales in China this year of product lines used to make relatively older chips, which do not fall under the current restrictions.
Van Leeuwen said ASML was “the most important company that we have,” in an interview with Dutch business daily FD.
In the same interview, Van Leeuwen added: “We also say that the national safety of ourselves and our partners goes before economic interests.”
In February, the trade minister had told his parliament that restrictions on ASML’s shipments to China were aimed at preventing Beijing from using the firm’s sensitive technology to power progress in its military.
Export restrictions so far have had only a modest impact on ASML’s financial performance as the dominant company in its field.
But in the long term if the Netherlands is seen as an unreliable business partner, Chinese chipmakers may seek to replace its equipment with that of competitors such as Nikon and Canon of Japan, or Chinese domestic firm SMEE, which is seeking to improve its products.
- Reuters, with additional inputs from Vishakha Saxena
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