U.S. wants to ban Dutch ASML from supplying any chip-making equipment to China

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Joseph P Chacko
Joseph P Chacko
Joseph P. Chacko is the publisher of Frontier India. He holds an M.B.A in International Business. Books: Author: Foxtrot to Arihant: The Story of Indian Navy's Submarine Arm; Co Author : Warring Navies - India and Pakistan. *views are Personal

The U.S. is putting pressure on the Dutch government to ban ASML, a local company, from selling chip-making equipment to China. If the United States succeeds in this matter, it will seriously undermine the aspirations of the Middle Kingdom to become the world leader in semiconductor manufacturing by 2025.

ASML is the world’s leading manufacturer of lithographic equipment for chip production. However, it cannot sell its advanced EUV lithography facilities, which produce semiconductors using state-of-the-art manufacturing processes, to China. According to Bloomberg, the U.S. government does not plan to stop at these restrictions and wants to eventually achieve a ban on supplies to China and equipment for DUV lithography, based on which chips are produced on more mature technical processes. This includes chips for P.C.s, servers, mobile electronics, cars and robots.

According to Bloomberg, the U.S. government will also limit the sale of old equipment.

A representative of the Dutch company noted that ASML is unaware of policy changes. No decisions have been made, and the company does not comment on rumours.

US ASML shares fell 7.2% after the release of the report. Other gear makers also lost ground, with Lam Research shedding 3.6% and Applied Materials shedding 2.4%.

It will not be easy for the U.S. to get a ban on the supply of all lithographic equipment to China. The Chinese factories operated by local companies Hua Hong, Semiconductor Manufacturing International Co. (SMIC) or global manufacturers such as TSMC, Samsung and S.K. Hynix in 2021 accounted for about 16% of ASML’s revenue last year, which reached $18.6 billion. China ranks third for ASML in sales after Taiwan and South Korea.

ASML itself says that it is not the only manufacturer of DUV scanners (although the largest), and Canon and Nikon produce similar installations. As metioned by Frontier India, the Japanese companies do not make the equipment for photolithography in deep ultraviolet with a wavelength of 13.5 nanometers. However, if the United States achieves a ban on their supplies to China, then the Celestial Empire will be unable to find alternative suppliers of this equipment quickly. The U.S. government believes that modern chip packaging technologies allow Chinese companies to design and manufacture their own chips, contributing to China’s technological superiority in supercomputing and, more importantly, in military development.

The U.S. has already imposed trade sanctions on several Chinese chipmakers and denied them access to equipment and technologies with American parts. For example, Huawei and its semiconductor division HiSilicon, which was developing chips based on Arm architectures, were hit. The ban on the supply of any lithographic equipment to China will have a serious blow to local production.

The U.S. could put pressure on local Chinese chip production beyond just a ban on ASML equipment. Chinese semiconductor factories use many tools, equipment and materials from American companies like Applied Materials, KLA and Lam Research. A ban on their work with China could have a disastrous effect on China.

However, sanctions against China will also seriously affect the whole world. For example, a significant part of DRAM and 3D NAND memory chips is produced in Chinese factories. If the same companies, Samsung and S.K. Hynix, are left without Chinese production, this will create a global shortage of chips and electronics in general. TSMC, SMIC and Hua Hong have a huge number of international clients. If they reduce their production, this will also negatively affect American chip developers.

Chinese import substitution in chips

After the start of the trade war with the United States, the Chinese began to implement import substitution. In January 2021, AMEC head Gerald Yin said at the reporting conference that “several world leaders in the production of 5-nm chips” use the company’s industrial facilities.

The equipment, which the company representative spoke about, is designed for plasma “dry” etching, which is also called reactive ion etching. During production, one layer after another is removed from the crystal using plasma.

The Chinese company provides equipment for processing 300 mm silicon wafers, which can be applied to a wide range of technical processes – from 65 nm to 5 nm.

Now the Chinese are producing their own chips – both processors and graphics accelerators. The joint venture between Via Technologies and the Chinese government performed well. Other companies are not far behind, including Huawei, which fell under U.S. sanctions. China is investing $1.4 trillion in chip production as per the information in 2021. Funds will be received by Alibaba Group, Huawei Technologies Co. Ltd, SenseTime Group Ltd. and several other high-tech companies. Their main task is to reduce the dependence of China’s electronic industry on other countries, mainly the United States.


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