US bans Dutch ASML chip machines from being used in China

In the geopolitical standoff between the United States and China, a new blow to Feldhoven was dealt through South Korea. Banning ASML’s Dutch chip machines in China is a major blow to South Korea’s SK Hynix, a major producer of memory chips, which has wanted to modernize its Chinese factory in Wuxi.

A ban can have all kinds of consequences. For SK Hynix itself, which now has to build a new production line elsewhere. To supply memory chips that are already rare: South Koreans are responsible for about 15 percent of global production, half of which takes place in China. For ASML, which can lose clients in this way. And for the worldwide chip manufacturing, which may be transferred to other countries.

Export

ASML has long been a target of US sanctions. The company makes the “chips” on which the chips are baked, with a precision that no competitor can match. The smaller the wavelength of light at which the patterns are engraved into the chips, the smaller the number of circles (and thus zeros and ones) can fit on a chip, and the smaller or faster, for example, a smartphone can become that you enter the chip. ASML has now reached extreme ultraviolet (EUV), with a wavelength of about 13 nanometers. The cost of each device is about 150 million euros.

Because the Americans are afraid that the Chinese are using the chips for military purposes – and are in fact afraid of Chinese competition in general – they are trying to prevent the machines from being exported. The Trump administration lobbied the Dutch government not to grant ASML an export license to deliver a single EUV machine to China’s SMIC. President Biden continues that policy. The export license was put in a drawer, and ASML sold the device to another party. ASML still sells SMIC’s slightly rough (DUV) machines.

increasing pressure

But the pressure is mounting. Earlier this year, a panel also advised the US government to ban some of these DUVs. And now it turns out that Americans don’t want modern machines in China anyway, even if they are owned by a foreign company. ASML generated about 17 percent of its €14 billion turnover in China in 2020, whether through foreign companies or not.

According to an ASML spokesperson, the restricted status of its EUVs was initially a problem for SK Hynix. She expects the South Koreans will now place the devices at a factory outside of China.