The Netherlands, under its newly elected prime minister Dick Schoof, is poised to restrict ASML Holding NV, a Dutch company and a leading player in the semiconductor industry, from providing repair and maintenance services to Chinese companies. ASML is the sole supplier of extreme ultraviolet (EUV) lithography machines, crucial for manufacturing the world’s most advanced chips. This decision, driven by US pressure, will significantly hinder China’s ability to produce advanced semiconductors, potentially affecting ASML’s own business by discouraging Chinese companies from purchasing its equipment.
The Dutch government is reportedly refusing to renew ASML’s licenses for repair and maintenance services in China, including the provision of spare parts and the deployment of ASML employees at Chinese companies. Semiconductor production lines are incredibly complex and require dedicated personnel for maintenance. ASML employs 10,000 customer support staff, including service engineers and application specialists, some permanently stationed at foreign manufacturing companies. While Chinese companies have been unable to purchase EUV lithography machines from ASML, the new rule will target the servicing of ASML’s deep ultraviolet (DUV) lithography machines, which are used by Chinese tech companies such as Huawei.
The move aligns with the US’s ongoing efforts to curb China’s semiconductor industry growth, seen as a potential threat to national security. The Biden administration has implemented a series of measures to hinder China’s advancements in the sector and bolster the US domestic industry. These include restrictions on US personnel working with Chinese semiconductor companies, an executive order limiting US investments in Chinese high-tech sectors, and incentives for domestic chip production. The latest move, involving the Dutch government, demonstrates the US’s influence on its allies to restrict Chinese technological progress. China’s Ministry of Commerce has criticized these actions as undermining international trade rules and disrupting global supply chains.
Despite significant investments, China still lags behind in developing its own semiconductor technology to break free from reliance on foreign suppliers. The impact of this restriction will be felt across the semiconductor sector, particularly affecting major semiconductor ETFs such as VanEck Semiconductor ETF (SMH), iShares Semiconductor ETF (SOXX), and Direxion Daily Semiconductor Bull 3X Shares (SOXL).
