ASML Faces Setback: Dutch Government Partially Revokes Export License to China

ASML, a prominent computer chip equipment manufacturer, recently announced that the Dutch government has partially revoked an export license for the shipment of specific machines to China. This development has not only led to a decline in ASML’s shares but has also drawn criticism from Beijing.

License Revocation Impacting Advanced Production Facilities

ASML Shares Decline on Concerns About Chip Market Outlook - Bloomberg
The affected machines belong to a model range that, under U.S. government pressure aimed at restricting China’s chip-making capabilities, has required a Dutch license since September 2023. ASML clarified that it has received “further clarification” on recent U.S. rules, affecting sales to a “limited number of advanced production facilities.” Despite the uncertainty regarding the exact number of affected machines, ASML’s shares experienced a 2.5% drop, closing at 664.3 euros on the first trading day of 2024.

In a significant shift, China became ASML’s largest market in the third quarter of 2023, constituting 46% of the company’s sales and surpassing Taiwan and South Korea. Chinese customers have been advised not to expect licenses for specific systems from January 1, 2024, leading to concerns about the potential impact on production.

Beijing criticized the move, urging the Netherlands to “protect the common interests” and maintain stability in international supply chains. In response, the Dutch foreign ministry clarified that export license requests are evaluated on a case-by-case basis for national security reasons.

ASML’s Dominance in Lithography Systems

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ASML, as Europe’s largest technology firm, dominates the market for lithography systems, a critical step in the chip-making process. Denial of access to ASML’s advanced lithography machines raises the challenge for Chinese customers to explore alternative options and potentially acquire additional equipment to meet capacity goals.

Despite U.S.-led restrictions, China has been actively investing in developing a self-reliant semiconductor supply chain. Shanghai Micro Electronics Equipment (SMEE) stands as China’s sole known lithography machine manufacturer. Recent reports indicate progress in SMEE’s development of a lithography machine for 28nm production nodes, marking a notable achievement for the company and China’s semiconductor industry.