"No Old Semiconductor Equipment Models Allowed in China"… US Pressures 'Super Eul' ASML Again (Comprehensive) [New Economic Security Landscape]

⑦ Biden Administration Strengthens Efforts to Curb China's Semiconductor Rise
ASML, the 'Super Eul' Valued by Samsung's Lee Jae-yong
DUV Equipment Facing US Export Halt Pressure, Domestic Supply Shortage Amid China's Sweep

[Image source=Reuters Yonhap News]

[Asia Economy reporters Jeong Hyunjin and Moon Chaeseok] The United States, focused on curbing China's semiconductor rise, is once again pressuring ASML, the Dutch semiconductor equipment manufacturer known as the 'super subordinate' in the semiconductor industry. Following the ban on exporting extreme ultraviolet (EUV) lithography equipment essential for advanced processes, the U.S. is reportedly requesting the Dutch government to also prevent the export of older models, such as deep ultraviolet (DUV) lithography equipment, to China.

Domestic semiconductor companies with production plants in China say they do not expect immediate damage but are closely monitoring the situation. SK Hynix operates a NAND flash plant in Wuxi, China, and Samsung Electronics runs a NAND flash plant in Xi'an, China.

On the 5th (local time), Bloomberg News cited multiple sources reporting that the U.S. government is lobbying the Dutch government to block ASML from selling older semiconductor equipment, including DUV, to China. Additionally, at the end of May and early June, Don Graves, U.S. Deputy Secretary of Commerce, visited the Netherlands and Belgium to discuss supply chain issues and mentioned the China export issue. Sources said he also visited ASML headquarters and met with CEO Peter Wennink to discuss related matters.

ASML is the world's only company producing EUV equipment necessary for cutting-edge processes. Global semiconductor companies such as Samsung Electronics, U.S. Intel, and Taiwan's TSMC line up with billions of won to acquire ASML's equipment, making its power so strong that it is called the 'super subordinate.' Samsung Electronics Vice Chairman Lee Jae-yong recently cited his visit to ASML during a European business trip to see next-generation technology as one of the most important moments.

Samsung Electronics Vice Chairman Lee Jae-yong (second from left) is inspecting semiconductor equipment with ASML CEO Peter Wennink and ASML CTO Martin van den Brink at ASML headquarters in Eindhoven, Netherlands, on the 14th of last month (local time). [Image source=Yonhap News]

The DUV equipment that the U.S. is demanding the Netherlands to halt exports of is a device that uses light to etch electronic circuits onto wafers and is an older version of the advanced EUV equipment. This equipment is mainly used in semiconductor processes other than the foundry's 5-nanometer (nm; 1 nanometer is one-billionth of a meter) or smaller processes. In memory semiconductors, more than 90% adopt the DUV process. In recent years, as China has shifted its focus from competing in advanced processes to developing outdated processes, Chinese companies have actively purchased DUV equipment, causing domestic semiconductor companies to experience shortages in DUV equipment supply.

The Dutch government reportedly has not yet agreed to the U.S. proposal for additional restrictions on ASML's exports to China, viewing that it could damage trade relations with China. The Dutch government has already not granted ASML permission to export EUV equipment to China. China is the Netherlands' third-largest trading partner after Germany and Belgium.

Bloomberg analyzed, "This move by the U.S. aims to expand the suspension of advanced system sales to China to curb China's semiconductor rise attempts," adding, "If the Dutch government agrees, it would seriously impact Chinese semiconductor companies from SMIC to Hua Hong Semiconductor." Johnson Wang, an analyst at the Taiwan Institute of Economic Research (TIER), said, "Lithography equipment is the hardest equipment for China to replace," and "Without overseas DUV lithography equipment, the advancement of China's semiconductor industry could be halted."

ASML stated, "These discussions are not new, and no decisions have been made," adding, "We will not specifically respond to rumors." However, CEO Peter Wennink expressed opposition earlier this year to banning DUV equipment sales to China. Following Bloomberg's report, ASML's stock price fell. On that day, ASML closed at $432.40 on the Nasdaq, down 3.87% from the previous day.

Bloomberg also reported that the U.S. government is applying similar pressure on Japan. Nikon of Japan sells similar technology to Chinese semiconductor companies, and the U.S. is asking for this to be stopped.

The domestic semiconductor industry responded that there is no immediate significant impact on production. However, they said they will closely monitor the situation in case it prolongs. An industry official said, "The U.S. considering restrictions on DUV lithography equipment exports to China is not new, and the specific timing and extent of restrictions have not been finalized yet," adding, "Even if DUV export restrictions are implemented, they will be limited to specific items, so there will be no impact on domestic companies."

However, since this equipment is used throughout the memory semiconductor process, the industry believes it will not be easy to overlook if the pressure becomes concrete. Another industry official said, "Due to U.S. restrictions, domestic companies will not suffer serious damage such as production disruptions immediately," but added, "Restricting the supply of DUV, an older model than EUV, is essentially raising the level of all-around pressure, so we will closely watch whether this situation prolongs."