ASML warns US that imposing more sanctions on China will seriously impact their business

The Dutch company ASML is growing weary of the United States, to the point of sending them an ultimatum that if new restrictions are imposed on China, it would not be China that would be seriously harmed, but ASML itself. To give an idea, despite sanctions, more than 25% of ASML’s revenue in 2023 came from Chinese customers.

Although we have received significant orders from Chinese customers for several years, our execution rate has been below 50%. This means that while some of our other clients understandably took their foot off the accelerator, we were able to seize the opportunity to increase our execution rate for orders from China this year.

Thus, China represents a very important market for the world’s largest lithographic tool manufacturer. If the US strengthens export regulations, ASML can only stand to lose. It hasn’t suffered much so far since it can only not ship advanced machinery, which is related to deep ultraviolet lithography (DUV) and extreme ultraviolet lithography (EUV). Clearly, there has been no shortage as the AI and high-performance chip markets rely on this machinery. However, expanding these restrictions will definitely affect its revenue.

ASML warns that imposing new sanctions will seriously harm its business

To be precise, according to the data provided, Chinese factories accounted for 26.3% of ASML’s revenue in 2023. Additionally, China was the second-largest buyer of ASML tools by country/region, only surpassed by Taiwan, which accounted for 29.3% of ASML’s revenue. However, Chinese companies accelerated the acquisition of manufacturing tools in the second half of 2023 in the face of tightening sanctions against the Chinese semiconductor industry.

The latest US, Dutch, and Japanese export regulations restricted sales of tools and technologies that can produce logic chips with non-planar transistors in 14 nm and 16 nm manufacturing processes and below, 3D NAND with 128 layers or more, and 18 nm or lower DRAM integrated memory circuits. This will not solve anything either, as the local industry is working tirelessly to develop its own lithographic machines.

“Geopolitical tensions can lead to export control restrictions, trade sanctions, tariffs, and, more broadly, international trade regulations that may affect our ability to supply our systems, technology, and services,” ASML said in its recent 2023 revenue report.

“Our ability to supply technology in certain countries, such as China, has been and continues to be affected by our ability to obtain the necessary licenses and approvals. The list of Chinese entities affected by export control restrictions has increased since 2022. These and other developments in multilateral and bilateral treaties, national regulation, and trade, national security, and investment policies and practices have affected and continue to affect our business and the businesses of our suppliers and customers.”

“We also face competition from new competitors with significant financial resources, as well as competitors driven by the ambition for self-sufficiency in the geopolitical context. Moreover, we face competition from alternative semiconductor manufacturing technologies or processes.”

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