Dutch Prime Minister Mark Rutte’s upcoming meeting with Chinese President Xi Jinping tomorrow is expected to tackle a critical issue beyond the officially stated topics of bilateral ties and the Middle East. High on the agenda will be the fate of servicing billions of euros worth of chip-making equipment sold by Dutch giant ASML to Chinese customers.
ASML is the world leader in lithography machines, crucial tools for etching circuits onto computer chips. These machines have become a major point of contention in the ongoing “chip war” between the United States and China. China, under President Xi’s leadership, is heavily investing in building its own domestic chip industry, while the U.S. seeks to curb China’s ability to achieve self-sufficiency in this critical technology.
The Netherlands, a key U.S. ally, has already restricted ASML from selling its most advanced “DUV” machines to China. However, a grey area remains regarding servicing equipment already sold – valued at over 6 billion euros for 2023 alone.
The crux of the issue lies in future licensing for maintaining these existing machines. Without such licenses, granted by the Dutch government, ASML’s equipment in China could become inoperable within weeks, crippling major Chinese chipmakers like SMIC.
ASML maintains it complies with all export regulations. While existing licenses for servicing most Chinese customers are valid until the end of 2024, renewals beyond that point remain an open question, particularly for the most advanced machines.
China, though no longer ASML’s top market, still represents a significant source of revenue for the company, especially for older chip-making technologies not currently subject to restrictions.
The upcoming meeting between Rutte and Xi is expected to see discussions on potential areas of economic cooperation, but the future of ASML’s servicing rights in China is likely to be a central point of negotiation. Both sides, the Dutch government caught between its ally and a major trade partner, and China striving for technological independence, have significant stakes in the outcome.