Yahoo Finance Dutch Seek Middle Ground as US-China Chip Dispute Escalates
(Bloomberg) -- The Dutch are trying to find a middle ground between the US and China in an escalating battle over the world’s chip supply chain.
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The Netherlands announced new plans this week to expand restrictions on exports of the latest semiconductor technology, but they appeared to fall short of measures the Biden administration took last year to limit exports of American-made machinery and knowhow to Chinese chipmakers.
In doing so, Dutch Prime Minister Mark Rutte is walking a fine line. His government is facing increasing pressure from Washington to help forge a global blockade to stifle Beijing’s rise in the chip-making space. But his country’s most valuable company is ASML Holding NV, and China is one of its biggest customers.
Rutte’s situation in some ways mirrors the position that ASML’s Chief Executive Officer, Peter Wennink, is facing himself — beholden to the Netherlands’s close ally as tensions rise between the US and China, while trying to protect a key source of growth.
In an interview with Bloomberg in January at the company’s headquarters in Veldhoven, Wennink summed up his position: “We’re businesspeople. We’re not politicians.”
While ASML has long been prevented from selling its most advanced technology — known as extreme ultraviolet lithography — to Chinese companies, the latest proposal will raise the issue of how effective the US campaign to suppress China’s technological development will be if allies don’t fully align with its plan.
It may also cast shadow over a pledge by senior US officials including Secretary of Commerce Gina Raimondo to create a level playing field for American equipment companies with an arrangement with Japan and the Netherlands.
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The three countries are the world’s top sources of machinery and expertise needed to make advanced semiconductors. The US rules banned American gear suppliers Applied Materials Inc., Lam Research Corp. and KLA Corp. from providing some of their technology to China. Japan’s Tokyo Electron Ltd. and ASML are the two other critical suppliers that the US needs to be on the same page for the sanctions to be effective.
ASML said in a separate statement Wednesday that the measures will “not have a material effect on our financial outlook” for 2023 or in the longer term. But the company said it will need to apply for export licenses for shipment of its most advanced deep ultraviolet lithography systems.
“It is important to consider that the additional export controls do not pertain to all immersion lithography tools but only to what is called ‘most advanced,’” the company said. However, ASML noted that it hasn’t received guidance on the exact definition of “most advanced.”
On Thursday, Dutch trade minister Liesje Schreinemacher further highlighted the delicate balance Rutte’s government is trying to strike. She characterized the relationship between the Netherlands and China as “mutual dependence” that works to the advantage of both countries and said the bilateral relations are still fine. She added that her government does not want to “hinder the value chains too much.”
“It’s a country neutral policy, and so it’s not a ban on China in any way, or an export ban to China in any way,” the official told reporters in Stockholm. She added that the most advanced systems it is permitted to sell to China will require export licenses for any country. The government will review applications case-by-case to see if it could have a negative effect on national security or could be used for military purposes.
Schreinemacher said the Dutch government is still talking to ASML about the exact number of machines to be restricted.
As the Netherlands tries to mitigate the damage from the worsening trade war, the US government has also introduced tight controls on US citizens and green card holders doing business in China. They now require a license from US authorities, as do people who maintain, repair and refurbish those items.
In January, Dutch and Japanese officials agreed in principle to join the US campaign, Bloomberg reported, citing people familiar with the matter.
--With assistance from Debby Wu, Ian King and Jillian Deutsch.
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