January 27, 2023

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Dutch chip tool maker ASMI warns of escalating trade tensions

The boss of Europe’s second largest semiconductor equipment maker has warned the US is turning up the heat on its allies to ensure key global chip companies fall behind Washington’s tight export controls on China.

Benjamin Loh, CEO of Netherlands-listed ASM International, which develops equipment for the production of semiconductor wafers and chips, said the US was “putting a lot of pressure on it. . . ensure that the Dutch and Japanese governments follow suit”.

He added: “The US government hopes that in the future this will be a multilateral thing because they have to stop everyone [selling high-end tools to China].”

Loh’s comments come as Alan Estevez, the US Commerce Department’s top export controls official, and Tarun Chhabra, the White House National Security Council official who pushed ahead with the process of introducing unilateral controls on Oct. 7, are preparing for talks with Dutch officials Officials in the Netherlands are preparing this week.

President Joe Biden’s administration has been trying for well over a year to reach a trilateral deal with its allies as part of its strategy to make it significantly more difficult for China to develop advanced semiconductors needed for military use, but failed to reach a timely agreement achieve .

ASMI is one of two major cutting tool manufacturers in Europe, alongside rival Dutch group ASML, Europe’s largest and most important company in the chip sector.

This month, ASMI released the most severe estimate of the impact of US export controls of any major European chip company, warning that about 40 percent of sales to China, which has grown to 16 percent of group sales, would be affected.

“China is not a small part of our business, but at the same time it’s not something that’s going to kill us,” Loh said, noting that ASMI’s “substantial operation” in Arizona in the US made it more exposed to Washington sanctions.

The toolmaker, which derives more than half of its revenue from sales of advanced chip devices, is still checking whether the conservative estimate is correct, Loh said, but “in hindsight, it might not be that bad after all — as it’s very conservative.” – because I think we haven’t seen the end yet.”

Loh said his Chinese customers were “struggling now, trying to get all the different parts” they needed to build their planned manufacturing lines.

Even if they were ultimately able to purchase more equipment than expected from ASMI, Loh added, the lack of access to crucial US resources would “make it very difficult for Chinese advanced fabs to move forward.”

U.S. export controls, which prevent American companies from exporting critical chipmaking tools to China and prevent “US persons” from directly or indirectly supporting the country, immediately hurt the top three U.S. chip toolmakers: Applied Materials, Lam Research and KLA.

But they’ve had much less impact on the other two non-US companies that dominate the global market – Tokyo Electron in Japan and ASML.

Estevez said last month US companies want “fairness,” which in the case of toolmakers means “multilateral” export controls. “We intend to give them that too, so it’s fair with their competition around the world,” he added.

In recent comments, Estevez said he was confident the three countries would reach an agreement “in the short term,” but many industry experts believe the timeline is overly optimistic amid concerns in Tokyo and The Hague in particular.

The less optimistic view is echoed by Dutch Foreign Trade Minister Liesje Schreinemacher, who has hinted in recent days that the US faces a difficult battle.

Speaking to the Dutch parliament last week, Schreinemacher said the Netherlands had to “defend our own interests,” which she said included economic interests.

In an interview with a Dutch newspaper this month, Schreinemacher said the Netherlands would look at the chip market “with a more critical eye” but cautioned against “copying American measures one-to-one.”

Her comments marked the first time that the Dutch government had even indirectly referred to the negotiations with the US and Japan.

A person familiar with US talks with the Dutch and Japanese said the Biden administration is determined to strike a trilateral deal. “We obviously saw that [recent] Dutch comments. I would just say there are private conversations too,” the person said.

Additional reporting by Javier Espinoza in Brussels and Manuela Saragosa in London