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  • Writer's pictureIan Murphy

US-Netherlands Efforts to Restrict Semiconductor Equipements to China

Updated: Oct 16, 2023

The Netherlands, as a major exporter of semiconductor manufacturing technology, has been under pressure from the United States to impose restrictions on exports of semiconductor manufacturing equipment to China. The Dutch government recently announced the progression of new export regulations on chip-making technology to curb China's progress in becoming a technological powerhouse. The main goal of these restrictions is to hinder China’s military expansion and to prevent the PLA from becoming aggressing against China’s neighbors.

The Financial Times reports that the Chinese semiconductor manufacturers' requirement to manufacture advanced chips is restricted by the need to procure high-tech machinery, such as deep lithography equipment, which are widely used to create powerful chips. Further, the move was broadcasted on an announcement made by Netherlands-based leading in global chip supply chain equipment, Advanced Semiconductor Materials Lithography (ASML), which stated that the new export controls are centered only around advanced chip manufacturing technology, comprising the most modern deposition and immersion lithography tools. ASML reiterated that it’s not entirely banning the immersion lithography controls but mostly restricting China from accessing advanced tools.

The United States has been in discussions prior with its allies, such as the Netherlands and Japan for months now, urging them to impose restrictions on the sale of chipmaking technologies and goods to China. This particularly discourages the key suppliers from providing chipmaking exports that could benefit China's semiconductor advancement. These restrictions are a significant setback for China's technological ambitions, as semiconductors are the brain for many high-tech products such as smartphones and computers enabling advancement in technology and other electronic devices. Semiconductors could also be considered a dual-use technology, since it has various military applications, such as navigation systems for smart missiles, tanks, and modern fighter jets.

The move by the Dutch government was criticized by China, which stated “China is firmly opposed to the interference in economic and trade cooperation, and the sabotage of stability of global production and supply chains. This behavior is not in the interests of any party,”

These export controls are expected to have an immediate impact on China’s semiconductor manufacturing ambitions since the manufacture of semiconductor machinery takes a long time. Specifically, China will be unable to produce up-to-date logistic and DRAM modules in the volumes needed to support its domestic high-tech consumer industries. It is also estimated that China will be unable to economically manufacture semiconductor manufacturing equipment for its own semiconductor industry for the next several years since it lacks technical know-how and training.

U.S. cooperation with the Netherlands on blocking technology exports to China is a step in the right direction to curb China’s aggressive military ambitions, By joining forces, both countries can more effectively limit China's access to acquire the key components needed to build its semiconductor industry. The next step in this process for the United States will be to work with countries and companies to prevent engineers in the semiconductor industry from taking jobs in China or lending expertise to Chinese companies. Currently, there are very few policies in place to prevent individuals from sharing industry knowledge with Chinese firms.

As an alternative to importing foreign equipment to manufacture semiconductors, China is investing in its own semiconductor ecosystem to bypass export controls. One example of this is China’s investment in Yangtze Memory Technologies Co., which will bolster its struggling semiconductor industry in line with the Made in China 2025 initiative.

Despite the United States' inability to completely restrict its competitor, both the U.S. and the Netherlands are working together to limit China's access to technology. Although some machinery may still be visible in China, the U.S. government is striving to implement strict control measures on advanced technological equipment in China's semiconductor industry. Ultimately, the U.S.-Netherlands partnership to restrict China's access to semiconductor technologies is a significant move that showcases the government's commitment to preserving national security. While certain technological tools remain accessible to China, the collaboration between the U.S. and the Netherlands represents a critical step towards curbing China's technological dominance by imposing tight control on the export of high-end machinery.

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