Fresh Blow to Beijing: Netherlands Restrict Dutch Chip Tool Giant, ASML Holding, From Servicing Machines in China

The tightening grip of export controls on China’s semiconductor industry just got tighter, as the Netherlands restricted Dutch chip tool giant ASML Holding from servicing some of its most advanced machines in China, SCMP reports, citing industry insiders.

This means mainland semiconductor factories are staring at a potentially significant production slowdown. This development compounds the challenges China already faces from existing U.S. restrictions and could represent a major setback to its technological advancement in a sector critical to national growth.

Earlier this month, Dutch foreign trade and development minister Reinette Klever announced new export controls, which require ASML to apply for licenses to sell and service its 1970i and 1980i immersion deep ultraviolet (DUV) lithography machines to Chinese customers. These machines, known for their versatility in covering various manufacturing nodes, are a vital workhorse in China’s semiconductor factories. Now, the ability to maintain and repair these machines, critical to keeping production yields high, could be disrupted.

This shift comes as part of a broader alignment with U.S. trade restrictions that took effect in November last year, aimed at limiting China’s access to critical technologies over national security concerns. Washington had already placed restrictions on the same equipment, and The Hague’s decision solidified the Western alliance’s strategy to curb China’s semiconductor industry.

Unsurprisingly, China’s commerce ministry has voiced strong objections to this latest move, viewing it as a targeted attempt to stifle its tech growth.

ASML, which enjoys a near-monopoly in the world of advanced chip-making tools, stated that the rule change is “technical” and won’t affect its financial outlook for this year. However, the more immediate concern isn’t ASML’s revenue, but the potentially crippling effect on Chinese foundries that rely heavily on timely maintenance and updates to keep their production lines humming.

According to industry insiders familiar with ASML’s operations, losing access to service engineers and spare parts for these machines could have enormous short-term consequences. Maintenance services, which typically require 24/7 availability to resolve machine failures, are vital to preventing production bottlenecks.

For China, the loss of service could mean delays, inefficiencies, and eventually, a dip in chip output—a blow to its semiconductor ambitions.

ASML has a long history in China, entering the market in 1988 and installing more than 1,000 machines, including lithography tools and inspection systems. Yet, the number of those machines that are now subject to Dutch export controls remains unclear. ASML has said little about how deeply the new restrictions will affect its operations, but industry professionals agree that the real struggle comes not from maintenance alone but from the lack of new advanced lithography machines altogether.

To be clear, ASML is already barred from shipping its most cutting-edge EUV (extreme ultraviolet) machines to China—equipment that is essential for producing chips smaller than 7 nanometers, a threshold crucial for the most advanced applications in everything from AI to mobile processors. Now, the new restrictions also include some immersion DUV systems, such as the 1970i and 1980i models, further choking off China’s access to high-end chip manufacturing technology.

For China, the loss is not just about repairing machines; it’s about the future of its tech sector. Semiconductor factories rely on these machines to compete globally, and without access to the latest equipment, they risk falling behind. It’s not just a hit to one sector, but a ripple that will affect everything from AI development to defense and consumer electronics.

Moreover, the timing could hardly be worse. Mainland China is ASML’s second-largest market by revenue after Taiwan, and in 2023, it accounted for €2.35 billion (US$2.5 billion) in sales—almost half of ASML’s global system sales for the second quarter. But due to a significant backlog, ASML has only been able to fill 50% of its orders from China, exacerbating the country’s existing supply shortages.

The restrictions have left China scrambling to find alternatives, but the road to them is bumpy. Even though ASML’s older-generation dry DUV systems, which use air instead of water for printing circuits, remain unrestricted for now, they are far less efficient for producing the most advanced chips. And, according to Paul Van Gerven, editor at Dutch tech magazine Bits&Chips, the U.S. could introduce further sanctions if the Dutch authorities begin to waver. The race to find loopholes in these restrictions could soon close off entirely.

In the broader geopolitical context, the move is seen as part of a Western effort to limit China’s technological rise, particularly in areas where it could pose a competitive or security threat. The Dutch government’s decision aligns tightly with U.S. policy, and both nations appear committed to maintaining these restrictions despite pushback from Beijing. The fear, from the West’s perspective, is that allowing China unrestricted access to advanced chip-making tools would give the nation an unassailable advantage in AI, military technology, and other high-stakes sectors.

The final piece of this puzzle is ASML itself, which finds itself walking a tightrope between massive financial interests in China and political pressure from Western governments. While it has avoided discussing details about servicing restricted machines in China, ASML’s CFO Roger Dassen has said the company still has “eyes on the tools” in Chinese fabrication plants. But for how long that will remain the case, given the escalating restrictions, is anyone’s guess.

Analysts believe that this could be one of the most significant setbacks to China’s semiconductor industry to date. Losing access to ASML’s advanced machines, maintenance services, and spare parts at a time when the country is trying to reduce its reliance on foreign technology, could slow its tech advancement by years.