ASML Semiconductor Equipment Technology Blocked by China... What Is Its Fate?

Dutch semiconductor equipment company ASML's last deep ultraviolet (DUV) lithography equipment export to China has been canceled due to pressure from the U.S. government. Chinese companies are now unable to use ASML's DUV equipment following the restrictions on extreme ultraviolet (EUV) equipment.

There are divided opinions on whether the U.S.'s strengthened semiconductor containment of China will bring a crisis to China's semiconductor industry or whether the Chinese government will turn this into an opportunity for localization and a turning point.

On the 1st (local time), ASML announced, "The government recently partially revoked licenses for exporting NXT:2050i and NXT:2100i lithography equipment to China." This action follows the U.S. government's announcement of regulations allowing export restrictions on some ASML equipment containing U.S. components, aimed at strengthening controls over AI semiconductor exports to China.

ASML leads the global lithography equipment market. Lithography equipment is used to project light onto semiconductor raw material wafers to etch fine circuits. While EUV uses short-wavelength ultraviolet light at 13.5 nanometers (nm), DUV uses long-wavelength ultraviolet light such as 193 and 248 nm. ASML is considered the only competitive semiconductor equipment company producing EUV, and the Dutch government has banned EUV exports to China since 2019. Last year, regulatory measures were also announced for DUV, which had previously been allowed for export to China.

According to Bloomberg News, although ASML had licenses to transport three units of top-tier DUV lithography equipment to Chinese companies by this month, U.S. government officials reportedly demanded an immediate halt to the scheduled shipment of some equipment to China. This move is analyzed as a rapid response by the U.S. after it was revealed that ASML's DUV equipment was used in the 7 nm advanced semiconductors found in the smartphone (Mate 60 Pro) unveiled by Chinese IT company Huawei in August last year.

According to data from the Chinese Customs Administration, China's imports of ASML lithography equipment from July to November last year surged more than fivefold to $3.7 billion compared to the same period the previous year. The proportion of China in ASML's sales increased significantly, accounting for 8% in Q1, 24% in Q2, and 46% in Q3 last year. Following export restrictions on EUV and now DUV, it is interpreted that China has begun stockpiling ASML equipment due to concerns over supply disruptions.

ASML projected that the new U.S. regulatory measures targeting China would impact about 15% of its sales to China. China is ASML's third-largest customer by sales proportion, following Taiwan and South Korea.

With access to ASML semiconductor equipment completely blocked by this measure, China’s domestic industry is inevitably expected to suffer damage. Some experts also predict that the more the U.S. expands its semiconductor containment of China, the more intense China's localization efforts will become. According to the Korea Institute for International Economic Policy, China's semiconductor equipment localization rate was 35% in 2022, up 14 percentage points from the previous year, but the DUV localization rate remains at about 3%. Shanghai Micro Electronics, China's only lithography equipment company, has developed domestic DUV equipment, but it shows a 15-year technology gap compared to ASML's latest products.

Peter Wennink, former CEO of ASML, expressed concern to Bloomberg News, saying, "The more pressure applied to China, the more likely China is to double its efforts."

This content was produced with the assistance of AI translation services.