U.S.-Led Chip Talks Targeting China Closer to Deal, ASML Says

What’s new: The U.S. government is hashing out the final details of an agreement with the Netherlands and Japan that would further squeeze the supply of chipmaking tools to China, according to key Dutch fab supplier ASML Holding NV.

The disclosure from ASML over the weekend raised questions about whether such a deal would extend previous curbs on the most advanced machines to the sale of slightly less advanced fabbing equipment such as deep ultraviolet (DUV) lithography.

Although no official government announcement has been made, industry sources from China and the U.S. told Caixin on Saturday that a high-level deal had been reached between the U.S., Japan and the Netherlands. One source added that Dutch officials had yet to brief local firms on the specifics.

ASML said in a statement to Caixin it did not expect the change to throw out its 2023 earnings prediction given it would take time for such a deal to be fleshed out and enacted, and given its business in China is focused on mature nodes.

Why it matters: The U.S. started to put pressure on Dutch government to stop ASML from selling its most advanced gear, extreme ultraviolet lithography (EUV) machines, in 2018. Dutch officials subsequently stopped renewing licenses for their export. EUV technology is generally used to produce the most advanced chips in the world, which have tiny nodes of 7 nanometers or smaller.

ASML has a global monopoly on EUV technology. But Japanese optical giants Nikon Corp. and Canon Inc. are its competitors when it comes to DUV machines.

A successful ban on exports of DUV technology would pile pressure on China’s sputtering chip industry, which has been racing to upgrade its own native tech amid U.S. sanctions, even as it is roiled by a growing corruption scandal involving strategic state investment aimed at growing the sector.

Related: In Depth: Can Beefed Up U.S. Chip Restrictions Energize China's Local Tech Push?

China Weighs on U.S. Chipmaking Gear Specialist Lam Research

Quick Takes are condensed versions of China-related stories for fast news you can use.

Contact reporter Ward Zhou (nanyuzhou@caixin.com) and editors Bertrand Teo (bertrandteo@caixin.com) and Flynn Murphy (flynnmurphy@caixin.com)

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