Japan, Netherlands agree to help US limit exports to China

Business news | January 30, 2023

By Peter Clarke

Materials & processes Analog

Japan and the Netherlands have agreed with the United States to further restrict China’s access to chipmaking equipment, according to numerous reports.

ASML Holding NV (Veldhoven, The Netherlands told Reuters it was aware of governmental talks but did not know the details of the agreement or how it would affect its business. Similarly, several Japanese equipment suppliers told Reuters they were unaware of any contact from Japanese authorities on any new restrictions.

The agreement was reportedly reached Friday but it is not known when it will be announced. ASML’s share price was down about 2.5 percent on Monday morning.

“It is our understanding that steps have been made towards an agreement between governments which, to our understanding, will be focused on advanced chip manufacturing technology, including but not limited to advanced lithography tools,” an ASML spokesperson reportedly said to CNN late Friday in response to questions about export controls to China.

An additional round of export controls could move chipmaking equipment sanctions from affecting extreme ultraviolet lithography (EUV) to the more broadly applied deep ultraviolet (DUV) lithography. EUV only impacts Chinese R&D at the leading edge of chip manufacturing and monopoly supplier ASML has been prevented from selling this equipment since 2019. However, it has continued to supply DUV lithography equipment which supports manufacturing behind the leading-edge. This is where Chinese fabs and foundries are volume manufacturers.

Broader restrictions could have an impact on the Chinese economy. China has protested that US-imposed sanctions are in breach of World Trade Organization commitments (see China preps $143 billion chip support action, goes to WTO) and are hurting the global economic recovery.

ASML impact

Earlier this month ASML had reported its fourth quarter and full year 2022 results and was bullish about 2023 despite its inability to ship EUV scanners to China.

ASML Holding NV has said expects sales to increase by more than 25 percent in 2023 due to continued strong demand for deep-ultraviolet (DUV) lithography equipment units.

ASML achieved annual sales of €21.2 billion and a net income of €5.6 billion in 2022 with a record backlog at the end of 2022 of €40.4 billion.

At the time of the financial results CEO Peter Winnink said: “We continue to see uncertainty in the market caused by inflation, rising interest rates, risk of recession and geopolitical developments related to export controls. However, our customers indicate that they expect the market to rebound in the second half of the year. Considering our order lead times and the strategic nature of lithography investments, demand for our systems therefore remains strong.”