President Biden's Administration Urges the Netherlands to Limit Chipmaking Equipment Servicing in China

The Biden administration plans to push the Netherlands to halt servicing of chipmaking equipment in China by ASML, the top chipmaking equipment maker. This move comes as part of the US efforts to limit Beijing's tech sector. Alan Estevez, the US export policy chief, is set to meet with Dutch officials and ASML representatives to discuss the servicing contracts. The US may also seek to expand the list of Chinese chipmaking factories restricted from receiving Dutch equipment.

Beijing has opposed the US actions, criticizing them as an "overstretching" of national security and coercion of other countries. Meanwhile, ASML's shares briefly fell after the news of the meeting, indicating market sensitivity to the potential outcome of the discussions.

The meeting marks the latest move by the US to rally allies in further crackdown on Beijing's chip production capabilities. Washington aims to limit China's ability to produce cutting-edge chips, following the development of the Huawei Mate 60 Pro, which showcased China's technological advancement despite US sanctions.

Impact on China's Economy

Chip-related exports to China are crucial for its economy, with ASML's second-largest market by sales being in China, after Taiwan. Restrictions on servicing ASML machines could be particularly significant due to the constant maintenance required for the large and expensive tools.

Last year, Japan and the Netherlands joined the US effort to restrict certain chipmaking technology from reaching China for national security reasons. While the Dutch government implemented restrictions on certain equipment for Chinese customers, it did not go as far as the US rules, which prohibited American firms from servicing equipment at advanced Chinese factories.

US Regulations and Potential Expansion

In October, the US issued regulations to keep more ASML DUV machines from certain Chinese chip factories. This move aimed at controlling the export of American parts in those tools. Officials may consider expanding the list of Chinese factories during the upcoming meeting with the Netherlands.

Last week, Dutch Prime Minister Mark Rutte met with Chinese President Xi Jinping, where Xi warned against setting up trade barriers. Rutte emphasized that Dutch restrictions aim to disrupt business as little as possible. However, he also expressed concerns about China's support for Russia, which the Netherlands views as its top national security threat, indicating potential scrutiny of exports with potential military uses to China. Rutte also remains a top candidate to become NATO's next secretary general.