Twin Blow To China's Semiconductor Ambition As Netherlands Unveils Export Curbs On ASML Chip Tool And U.S. Seeks To Restrict Flow of Nvidia AI Chips

In a twin blow to China's expansive semiconductor ambition, the Netherlands government has imposed further restrictions on shipments of ASML’s chip-making equipment and the U.S government reportedely planning new curbs on export of computing chips for artificial intelligence to the country.

Effective September 1, ASML will require an export license to ship its most advanced immersion DUV lithography systems to China

In an announcement on Friday, Dutch chip toolmaker ASML said that effective September 1, it will be required to apply for a license from Dutch government to ship its most advanced immersion deep ultraviolet (DUV) lithography systems, including the TWINSCAN NXT: 2000i, and more sophisticated models.

The Netherlands has already restricted some exports of extreme ultraviolet (EUV) lithography equipment essential for manufacturing advanced semiconductors.

ASML, which enjoys a near monopoly on advanced EUV lithography equipment (Japanese competitors like Canon have a minuscule market share), is a crucial supplier to chip manufacturing giants, including Intel, Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co (TSMC). It controls over 90% of the $17.1 billion global market for lithography equipment as of 2021.

ASML's EUV-based machines use light to etch ultra-small circuitry on chips, allowing packing more performance into the small slices of the silicon wafer. The machines can emit light with wavelengths one-fifteenth as small as the conventional chipmaking equipment, enabling it to etch finer circuits and thus squeeze more transistors onto a chip. The patterns link together as a single integrated circuit offering computing or memory functions.

Founded in 1984 as a joint venture between the Dutch companies Advanced Semiconductor Materials International (ASMI) and Philips, ASML began working on the EUV system in 1997.

China accounts for 15 per cent of ASML's sales, and export restrictions could seriously impede the ambitions of Chinese chip manufacturers. For instance, ASML has sold billions of dollars worth equipments to Semiconductor Manufacturing International Corporation (SMIC), a leading Chinese semiconductor manufacturer.

To achieve semiconductor self-sufficiency, Beijing has long been pursuing an ambitious plan to build a world-class home-grown chip industry to wean itself off imports -- an effort that would need ASML's one-of-a-kind EUV machines.

US set to unveil new controls for artificial intelligence chips

The Biden Administration is reportedely planning to tighten export controls announced in October last year to further restrict sales of some artificial intelligence (AI) chips to China.

The new restriction is likely to preemptively target the export of Nvidia Corp’s A800 chip, which the US-based company designed after the earlier controls were announced, a report in The Wall Street Journal said.

In October 2022, the U.S imposed export restrictions on shipments of American chip-making tools to China from US companies like Lam Research and Applied Materials on national security grounds.

In a regulatory filing in September 2022, Nvidia said that the US government has told it to stop selling two of its chips, designed for artificial intelligence network, to Chinese companies.

The company said the Biden administration is imposing a new license requirement on any products containing company's A100 and forthcoming H100 integrated circuits used in the machine learning processes that enhance AI systems.