The launch of Huawei’s Mate 60 Pro was not only a major event in the smartphone market last year. It was also a key event in the chip war between the United States and China, a competition that is part of the technological struggle between the two world powers. The reason was that this phone contained a chip that no Chinese company was theoretically capable of developing due to Washington’s web of sanctions aimed at neutralizing Beijing’s semiconductor industry. Stunned, the White House and its allies responded by tightening their restrictions, prompting the Netherlands to limit ASML exportsa company whose technology is fundamental to the production of next-generation chips. Now, The Hague is considering tightening restrictions on ASML again, in an effort to stifle China’s chip industry.
The Dutch government is considering imposing a Limit on ASML repair and maintenance services dedicated to keeping its equipment in optimal condition in China. If implemented, the move would be a major blow to Beijing’s chip industry, since ASML is the leading company in semiconductor lithography, a key process in chip manufacturing. It holds 82.9% of the global lithography market and is the only company in the world that produces EUV machines, which reduce the size of chips to accommodate more transistors. Although China has never managed to acquire this tool, it has a good stock of DUV machines, a model also created by ASML before EUV.
The Hague projects are as damaging to Beijing’s interests as they are easy to implement. ASML export contracts include maintenance clausesessential to have lithographic tools capable of operating with a resolution of less than one hundred nanometers. The idea of Dick Schoof’s government is simple: revoke licenses authorizing repair and the replacement of parts by ASML on Chinese soil, once they expire at the end of the year.
The bottom line is that China seems to have managed to produce high-end chips with technology that, in theory, is not designed for it, as is the case with DUV machines. This is one of the hypotheses considered by the White House to explain the advent of the chip produced by SMIC for Huawei’s Mate 60 Pro, a processor that has been given the code name Charlotte. during its careful and secretive manufacturing. This chip measures seven nanometers, which implies the use of a lithography machine similar to EUV, which operates with a resolution of eight nanometers.
As China, to our knowledge, has never been able to obtain a similar tool.The suspicion falls on the DUV machines, which operate with a resolution of one hundred nanometers, even though the use of this instrument implies a large margin of error when producing chips like “Charlotte”. For this reason, the Netherlands is considering taking shortcuts and stopping the maintenance of all ASML equipment on Chinese soil when the respective licenses expire this year. However, it seems that The Hague did not make this decision entirely autonomously.
The United States has been trying for some time to convince the Netherlands tighten restrictions on China’s access to ASML technology. The previous government of Mark Rutte, “the frugal”, managed to delay the Biden administration, apologizing for the need to demand more time to assess the consequences on Dutch exports of the said technology in the event of the application of stricter sanctions against China.
Today, and after the coalition formed after the Dutch elections of November 2023 revoked the export license for DUV machines, Washington has redoubled its pressure on The Hague. And it has done so until the end. Veiled threats to impose unilateral measures on allied countries that do not align with its protectionist policies toward China. Specifically, the United States has suggested the possibility of apply the FDPR rule (Foreign Direct Product Rule, in Spanish), which allows Washington to veto the sale of any product whose smallest part can come from the United States, including those manufactured abroad.
The application of this new measure by the Netherlands could disable ASML equipment in China by the end of the year. A real setback for Beijing’s chip industry, which is racking its brains to compete with Taiwanese companies, leaders in semiconductor manufacturing. In this sense, it is worth noting that currently, TSMC chips are two generations older than those of SMIC.
