Shares of ASML Holding, a key supplier of equipment to semiconductor manufacturers, fell on Tuesday after Bloomberg reported that the US government wants to ban the company from selling equipment to China.
ASML can no longer ship its most advanced tools to China, but the report says Washington will also restrict the sale of slightly older machines, citing “people familiar with the matter.” An ASML spokesman said the company is not aware of the policy change: “No decisions have been made and we do not want to speculate or comment on rumours.”
US ASML shares fell 7.2% after the release of the report. Other gear makers also lost ground, with Lam Research shedding 3.6% and Applied Materials shedding 2.4%. China is ASML’s third largest market after Taiwan and South Korea, accounting for about 16% of sales in 2021, or €2.1 billion.
ASML has a near monopoly on the production of lithographic systems, machines vital to chip makers such as Intel, TSMC and Samsung. Lithographic systems cost hundreds of millions of dollars each.
Lithography and other semiconductor manufacturing equipment require an export license, as computer chips are considered “dual-use” technology for both military and commercial purposes.
As of 2019, the Dutch government, in agreement with the US, has not licensed ASML to sell its most advanced “extreme ultraviolet” or EUV machines. ASML still sells “deep ultraviolet” or DUV machines to Chinese buyers. Most chips worldwide are manufactured using DUV lithography. Restricting their sale to China would seriously hurt the Chinese chip industry and likely exacerbate the global semiconductor shortage.
In 2021, the US National Security Commission on Artificial Intelligence, led by former Google CEO Eric Schmidt, recommended that the US State Department and the US Department of Commerce push allies to deny China access to better DUV, EUV systems and related tools.
In response, Citi analysts said they considered a total ban on DUV equipment “highly unlikely” but that further restrictions on equipment manufacturers could be due to “China’s foreign policy escalation with Russia or incursions into Taiwan.”