ASML And China Customers Are Haunted By The Uncertainty Surrounding New Dutch Chip Export Rules

The Dutch government has yet to define critical aspects of new restrictions on chip-technology exports to China, such as whether ASML Holding NV can service chip-printing machines already sold in the country.

“Those details have yet to be worked out,” Dutch Trade Minister Liesje Schreinemacher told reporters in Stockholm on Thursday.

While the Dutch plan announced on Wednesday puts the Netherlands in broad agreement with US goals of undermining China’s ability to make cutting-edge chips, ASML and its Chinese customers are still unsure how it will affect their businesses.

The Dutch company, Europe’s largest by market capitalization, will have 14% of its sales in China in 2022 and has sold more than 8 billion euros ($8.46 billion) in chip lithography equipment in China over the last decade.

Customers who purchase ASML machines enter into service agreements with the company for ongoing maintenance. In 2022, the “installed base” segment contributed approximately 25% of ASML’s total revenue.

The machines, which cost tens of millions of euros each and are used to create chip circuitry, require unique parts and constant maintenance to function properly.

According to analysts and the company, the Dutch government’s lack of clarity will cloud the company’s outlook. The key questions are whether there will be any restrictions on servicing and which models will be affected.

ASML has for the time being reiterated its guidance for 2023 of around 2.2 billion euros in flat sales in China. This compares to overall revenue growth of 25%, demonstrating the likely impact of the restrictions.

According to an ASML spokesperson, the company interprets the government’s comments to mean that only a small portion of its second-best product line will now be restricted in China, following a complete ban on its most advanced machines in 2019.

However, there is an element of guesswork involved. “ASML is awaiting further information,” said the spokesperson.

According to ING analyst Marc Hesselink, the new Dutch rules could affect products that account for 10% of ASML’s global sales. However, that is a worst-case scenario, and the impact will most likely be minimal.

Because ASML customers in China include South Korean chipmakers SK Hynix Inc and Samsung Electronics Co Ltd, which will almost certainly be granted licenses, as well as domestic Chinese companies like logic chipmaker SMIC and memory chip maker YMTC, which face U.S. export restrictions and may not be granted licenses.

Schreinemacher stated on Thursday that the Dutch would grant licenses on an individual basis rather than following orders from Washington.

Citi analyst Amit Harchandani, however, believes the Dutch restrictions are comparable to those imposed on US companies last year, and that ASML’s assessment of the impact is reasonable.

The picture is less clear for Chinese customers. “What we can say is that their ability to develop cutting-edge nodes will be significantly limited,” Harchandani said.

According to Hesselink of ING, most Chinese chip makers will now focus on “trailing edge,” or production of chips using slightly older technology. The Chinese may have a competitive advantage, and ASML’s sales in China may even increase slightly.

Regardless, he believes ASML will thrive outside of China in the long run as chipmakers around the world expand capacity.

“The demand for ASML machines is not going to be impacted, it’s simply going to shift to a different region,” he said.

(Adapted from

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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