Smooth white boxes, resembling large cargo vans, have become the focal point of the U.S.-China technology conflict. The complex lithography machines that print intricate circuitry on computer chips are now a key choke point as the United States aims to slow China’s progress in the chip-making industry. However, China lacks the technology to produce these machines in their most advanced forms.
To hinder China’s chip-manufacturing ambitions, U.S. officials have implemented measures to restrict the shipment of certain chip-making machines to China. Companies globally are now required to obtain a special license from the U.S. government before sending these machines. This move could significantly impact China’s efforts to develop its own chip-making industry and represents an extraordinary exercise of American regulatory power, wherein equipment manufactured outside the United States falls within U.S. regulation if it contains even a single American-made part.
This decision grants U.S. officials more influence over companies based in the Netherlands and Japan, where some of the most advanced chip machinery is produced. Notably, these rules will halt shipments of machines that utilize Dutch firm ASML’s deep ultraviolet (DUV) technology, which dominates the lithography market.
While ASML complies with the regulations, the company is unhappy with the export controls. The Dutch government shares U.S. security concerns but emphasizes that each country determines its own export restrictions.
ASML’s technology has revolutionized global computing power by enabling the production of increasingly smaller and more powerful chips. This technology has also provided the United States and its allies with leverage over China as they seek to translate technological advancements into military advantages. However, Chinese chip-making equipment lags behind the capabilities of machine suppliers like ASML, Applied Materials, Lam Research, Tokyo Electron, and Canon.
The United States’ attempt to use this technological advantage against China could strain alliances, as European government officials are cautious about undermining their own companies by blocking access to the lucrative Chinese tech market. The Netherlands, in particular, has faced ongoing pressure from the United States to restrict exports of ASML’s advanced chip-making machines.
Although the deep ultraviolet lithography machines are considered less of a national security risk, a Chinese firm’s use of ASML’s technology to surpass a technological barrier intensified concerns. As a result, updated export control rules were urgently needed to prevent China from manufacturing the most advanced semiconductors.
For now, ASML continues to conduct significant business with China, with sales to the country accounting for 46% of the company’s global total in the third quarter of this year. However, analysts anticipate that the new export controls could reduce ASML’s China revenues by 10 to 15% next year.
The latest restrictions not only impact ASML but also other equipment suppliers such as Applied Materials and Lam Research. The Dutch company will be prohibited from supplying replacement parts and servicing the machines facing these restrictions, which may lead to manufacturing problems for Chinese companies.
The expensive nature of these machines means they require regular software and maintenance support to ensure chip production continues smoothly. As a result, the expanded rules on sales to China will have implications for other essential advanced machines supplied by companies like Applied Materials and Lam Research.
While the full impact of the new export controls remains uncertain, companies involved in the chip-making industry are assessing their potential consequences.
Article Source: wealthnationusa
Unique Perspective: The U.S.-China conflict over expensive technology reveals the complex interplay between technological advancements, national security, and economic interests. Both countries recognize the significance of chip-making machines in gaining a competitive edge in various sectors. This ongoing struggle exemplifies the challenges faced by governments in balancing economic cooperation with national security concerns, spotlighting the intricate web of rivalries and alliances in the tech industry.
