China accuses US of undermining international trade over Dutch ASML export controls

The Dutch government has imposed new export controls on the advanced chip manufacturing tools uniquely made by ASML.

While China isn’t specifically named in the ASML announcement regarding the restrictions, it seems fair to assume that is the country they will mainly apply to. Similarly, the US doesn’t get a mention, but since its strategy of starving China of the means to buy or produce its own advanced chips is well established, you don’t have to be the most extreme conspiracy theorist to join the dots in that direction.

“Due to these export control regulations, ASML will need to apply for export licenses with the Dutch government for all shipments of its most advanced immersion DUV lithography systems,” said the ASML announcement. “The Dutch government will determine whether to grant or deny the required export licenses and provide further details to the company on any conditions that apply… ASML will continue to comply with applicable export regulations, including Dutch, EU and US regulations.”

So the assumption is that the Dutch government will deny any applications it associates with the Chinese state, which these days seems to mean all Chinese companies too. It should be stressed, however, that we’re not aware of any official statements confirming that assumption. That hasn’t stopped China from responding as if that was stated policy.

In response to a question asking about US and Dutch restrictions on the export of chip manufacturing equipment to China, Chinese Foreign Ministry Spokesperson Mao Ning said: “China opposes the US’s overstretching the national security concept, abusing export control tools, using all sorts of pretexts to cajole or coerce other countries into joining its technological blockade against China.

“These actions of interfering in normal trade between companies through administrative means seriously undermine market rules and the international trade order, disrupt global industrial and supply chains, and serve no one’s interest. We will closely monitor relevant developments and firmly defend our lawful rights and interests.”

It’s hard to find much fault in that statement. The original concern about having Chinese kit in 5G networks continues to snowball into a wide-reaching strategy of seeking to cripple China’s tech sector in general. The US has good reason to fear the rapid technological progress of its main geopolitical rival, but corrupting the global trade system in a bid to slow it down is a blunt and morally questionable tool that risks all kinds of collateral damage and unintended consequences.

A recent report in the Global Times, which is assumed to be controlled by the Chinese State, articulates this objection well. It also notes that ASML’s most advanced technology – EUV – has been restricted since 2019. Due to a quirk of R&D and, presumably, the patent system, ASML is a monopolist in these most advanced technologies. Being denied access to them, therefore, completely excludes China from the cutting-edge chip manufacturing business.

The US has already pressured TSMC, which is the world’s leading maker of such chips, into restricting its relations with China. In recent weeks it also leant on South Korea to restrict the sales of memory chips to China, as well as suggesting unpleasant consequences for Malaysia should it choose to use Huawei in its 5G networks. This ASML move would appear to be the latest in a long line of such moves and it’s very unlikely to be the last, with inevitable Chinese retaliations set to escalate the situation even further.

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