U.S. ramps up pressure on Netherlands to fall in line with China chip policy

Washington has its eyes on the Netherlands, a small however vital European nation that would maintain the important thing to China's future in manufacturing cutting-edge semiconductors.

The Netherlands has a inhabitants of simply over 17 million folks — however can be residence to ASML, a star of the worldwide semiconductor provide chain. It produces a high-tech chip-making machine that China is eager to have entry to.

The U.S. seems to have persuaded the Netherlands to stop shipments to China for now, however relations look rocky because the Dutch weigh up their financial prospects in the event that they're lower off from the world's second-largest economic system.

ASML's important chip function

ASML, headquartered in the city of Veldhoven, doesn’t make chips. Instead, it makes and sells $200 million excessive ultraviolet (EUV) lithography machines to semiconductor producers like Taiwan's TSMC.

These machines are required to take advantage of superior chips in the world, and ASML has a de-facto monopoly on them, as a result of it's the one firm in the world to make them.

This makes ASML one of the vital chip corporations in the world.

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ASML has not been ready to ship an EUV machine to China since 2019 due to varied Dutch export restrictions, in accordance to an organization spokesperson. But they mentioned that ASML expects "the direct impact of the new export control measures on ASML's overall 2023 shipment plan to be limited."

There are presently no EUV techniques in China. The U.S. is fearful that if ASML ships the machines to China, chipmakers in the nation might start to manufacture probably the most superior semiconductors in the world, which have in depth army and superior synthetic intelligence purposes.

U.S.-Netherlands talks

U.S. pressure on the Netherlands seems to have begun in 2018 beneath the administration of former President Donald Trump. According to a Reuters report from 2020, the Dutch authorities withdrew ASML's license to export its EUV machines to China after in depth lobbying from the U.S. authorities.

Under Trump, the U.S. began a commerce struggle with China that morphed right into a battle for tech supremacy, with Washington trying to lower off important know-how provides to Chinese corporations.

Huawei, China's telecommunications powerhouse, confronted export restrictions that starved it of the chips it required to make smartphones and different merchandise, crippling its cell enterprise. Trump additionally used an export blacklist to lower off China's largest chipmaker, SMIC, from the U.S. know-how sector.

President Joe Biden's administration has taken the assault on China's chip business one step additional.

In October, the U.S. Department of Commerce's Bureau of Industry and Security launched sweeping guidelines requiring corporations to apply for a license if they need to promote sure superior computing semiconductors or associated manufacturing gear to China.

ASML instructed its U.S. employees to cease servicing Chinese purchasers after the introduction of those guidelines.

Pressure on the Netherlands to fall in line with U.S. guidelines continues. Alan Estevez, the beneath secretary of commerce for business and safety on the U.S. Department of Commerce, and Tarun Chhabra, senior director for know-how and nationwide safety on the U.S. National Security Council, reportedly spoke with Dutch officers this month.

"Now that the U.S. government has put unilateral end-use controls on U.S. companies, these controls would be futile from their perspective if China could get these machines from ASML or Tokyo Electron (Japan)," Pranay Kotasthane, chairperson of the high-tech geopolitics program on the Takshashila Institution, instructed CNBC.

"Hence the U.S. government would want to convert these unilateral controls into multilateral ones by getting countries such as the Netherlands, South Korea, and Japan on board."

The National Security Council declined to remark when contacted by CNBC, whereas the Department of Commerce didn’t reply to a request for remark.

A spokesperson for the Netherlands' Ministry of Foreign Affairs mentioned it doesn’t remark on visits by officers. The ministry didn’t reply to extra questions from CNBC.

Tensions

Last week, U.S. Secretary of State Antony Blinken hailed the "growing convergence in the approach to the challenges that China poses," notably with the European Union.

But the image from the Netherlands doesn’t seem as rosy.

"Obviously we are weighing our own interests, our national security interest is of utmost importance, obviously we have economic interests as you may understand and the geopolitical factor always plays a role as well," Liesje Schreinemacher, minister for overseas commerce and growth cooperation of the Netherlands, mentioned final week.

She added that Beijing is "an important trade partner."

— CNBC's Silvia Amaro contributed to this report

based mostly on web site supplies www.cnbc.com

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