While China wants to be self-sufficient in chip production, the United States has found ways to prevent that from happening. The United States achieved this in part by pressuring the Netherlands to prevent the Dutch company ASML from shipping its most advanced lithography machines to China. These large and expensive machines are necessary for the production of advanced chips.
US ban on selling EUV machines to China hurts Dutch economy
What these lithography machines do is etch circuit patterns onto a wafer. Since powerful mobile chips contain billions of transistors, these patterns must be thinner than human hair. The most advanced lithography machines use a process known as extreme ultraviolet (EUV) lithography and each machine costs $150 million, has 100,000 parts and weighs nearly 200 tons. These machines are only available from the Dutch company ASML.
As big as a school bus and priced at $150 million each, this is an ASML EUV machine
The second most advanced method of lithography is known as Deep Ultraviolet Lithography (DUV) and ASML also manufactures these machines with other companies like Nikon and Canon. These machines can be purchased by Chinese chipmakers.
The Dutch authorities are beginning to get angry at the restrictions put in place by the United States which prevent ASML from selling EUV machines to China. A senior Dutch official said the Netherlands will defend its economic interests when it comes to selling chipmaking equipment to China.
According to the English language South China Morning Post, the Netherlands is tired of giving up revenue just to help America enforce its restrictions on China. On Tuesday, Dutch Foreign Trade Minister Liesje Schreinemacher told lawmakers that “it is important that we defend our own interests – our national security, but also our economic interests. If we put that in an EU basket and negotiate with the US and in the end it turns out that we’re giving deep ultraviolet lithography machines to the US, we’re worse off.”
The Netherlands is seeking to embrace China as a trading partner and is increasingly less interested in listening to US concerns about China building its own chips for military use. No EUV machines have been sold to the Chinese by ASML, and the US is now trying to get the Dutch to ban sales to China of immersion lithography technology, the most advanced type of lithography equipment deep ultraviolet (DUV) light proposed by ASML.
The Biden administration is trying to get U.S. allies, including the Netherlands and Japan, to block shipments of more chipmaking equipment to China. A trip to the Netherlands is planned later this month for Alan Estevez, the commerce undersecretary for industry and security. He hopes to discuss export controls with Dutch officials.
Chinese President Xi tries to convince the Netherlands to allow EUV sales to China
The Chinese put their own pressure on the Netherlands. Last week at the G-20 meeting, Chinese President Xi Jinping spoke with Dutch Prime Minister Mark Rutte and urged him to avoid disrupting global trade. Xi said, “We should oppose the politicization of economic and trade issues and uphold the stability of the global industrial chain and supply chain.”
The largest chip foundry company in China is SMIC and the company poses no challenge, at least for now, to global process leaders TSMC and Samsung Foundry. Whereas the foundry has developed basic 7nm chips, these components are intended for cryptocurrency mining and are a “stepping stone” for SMIC towards the production of “real” 7nm chips with logic and some capabilities of memory. SMIC’s ASIC chips are designed for specific applications only, such as cryptocurrency mining.
Although SMIC could eventually make more complex 7nm chips without using an EUV machine, moving to 5nm without the $150 million share might not be feasible. At this point, the Netherlands will really have to make a difficult decision, with the United States talking to them with one ear and the Chinese whispering with the other.