China and Japan: the United States to prevent China from buying Dutch chip machine

Some of the tech industry’s most important machines are made next to cornfields in the Netherlands. The Wall Street Journal reports that the U.S. government is working to make sure they don’t end up in China.

According to the report, Beijing has been pressuring the Dutch government to allow Chinese companies to buy an extreme ultraviolet lithography system made by Asmac Holding (ASML) that is critical to making advanced microprocessors.

Companies such as Intel, Samsung Electronics and TSMC (TSM) use the unique, 180-ton mega-machine for everything from cutting-edge smartphones and 5G cellular devices to computers used for artificial intelligence.

The Wall Street Journal reports that China wants to provide the $150 million machine to local chipmakers like Huawei, thereby reducing its reliance on foreign suppliers. But Asmac never shipped the machine, the report said, because the Netherlands was withholding export licenses to China under U.S. pressure.

The Wall Street Journal quoted U.S. officials as saying the Biden administration had asked the government to restrict sales of the machine for national security reasons. They first determined the machine’s strategic value and contacted Dutch officials.

Peter Wennink, chief executive of Asmac, has said the export restrictions could backfire.

“Export controls are an effective tool when it comes to targeted, specific national security issues,” Wennink said in a statement. However, he said the widespread use of export controls in the short to medium term “could reduce global chip manufacturing capacity and exacerbate supply chain problems.”

The Wall Street Journal reported that the U.S. lobbying has strained Sino-Dutch relations. The report cited Chinese officials as frequently asking Dutch officials why they would not grant Asmac a license to ship machines to China, according to people familiar with the matter.

The report also mentions that less than a month after Biden’s inauguration, White House national security adviser Jack Sullivan spoke with his Dutch counterpart about what the White House called “close cooperation” between the two countries on advanced technology. U.S. officials have said that continuing to limit Asmac’s business with China is Sullivan’s top priority.

The report said the U.S. pressure began in the Trump administration. Charles Kupperman, then deputy national security adviser, said in 2019 when he invited Dutch diplomats to visit the White House that “good allies don’t sell this kind of equipment to China.” Kupperman said Asmac’s machines would not work without the U.S. components, which the White House has the authority to restrict from exporting to the Netherlands.

But the report said people familiar with the matter said it is not a primary issue for President Biden at this time. The sources said the U.S. is trying to unite a coalition of Western countries in a joint effort on export controls. The move could also have an impact on Asmac, further disrupting the already strained semiconductor supply chain worldwide.

The report said Asmac has unique lithography technology, which is the key to chip manufacturing. The more transistors on a piece of silicon, the more powerful the chip will be. One of the best ways to pack more transistors into silicon is to draw thinner lines. That’s what Asmac specializes in: its photolithography machine can print the world’s thinnest lines: it uses lasers and mirrors to draw lines 5 nanometers wide and, within a few years, is expected to shrink to less than a nanometer wide. By comparison, a strand of human hair is 75,000 nanometers wide.

Without Asmac’s state-of-the-art machine, Chinese chipmakers won’t be able to make leading-edge chips until domestic tools catch up, the Wall Street Journal quoted analysts as saying. It is estimated that it will take at least 10 years for China to match Asmac’s technology.