(JW Insights) Jul 17 -- ASML Holding NV, the leading provider of chipmaking equipment, is facing tighter restrictions on its ability to work with Chinese customers, a further escalation in the technology clash between Washington and Beijing, reported Bloomberg on July 14.

Dutch export control rules will forbid ASML from maintaining, repairing and providing spare parts for controlled equipment without government approval, people familiar with the matter said. Those restrictions are related to new regulations the government published in June that prohibit ASML from shipping some so-called immersion deep ultraviolet lithography machines, its second-most capable machinery, to China without a license beginning in September.

In addition to the Dutch controls, the US is expected to bar ASML from selling even older DUV lithography gear to about half a dozen of Chinese plants without approval from Washington, said the people, asking not to be named because the rules aren’t yet public. Among the China plants the Biden administration is targeting is one operated by China's leading foundry SMIC.

The dual curbs come on top of sweeping export restrictions President Joe Biden administration’s imposed on China last year and threaten to degrade the Chinese semiconductor companies’ capabilities over time.

“The Dutch regulations are an official stake in the ground that the Netherlands does not want China to be able to produce the most advanced semiconductors,” said Dylan Patel, founder of the research group SemiAnalysis. “Without access to these machines, Chinese chip companies will be at a significant disadvantage in the global market for advanced logic and memory chips.”

“I anticipate that the new restrictions will significantly impact Chinese chip companies’ future plans,” Patel said. “They will likely be forced to delay or cancel the development of certain future leading-edge process technologies.”

ASML has never been able to sell its most advanced chipmaking machines to China, which use extreme ultraviolet, or EUV, lithography. That’s because the US and its allies are worried these technologies could be used to advance Chinese military capabilities.

The Biden administration will impose the new curbs on ASML by invoking the Foreign Direct Product Rule, which allows it to limit foreign-equipment suppliers’ sales if their products contain even a small amount of American components, the people said. Reuters previously reported some details of the new US moves to limit ASML’s China business.

The US may also ban ASML from providing maintenance and repair services and supplying spare parts for the restricted machines installed at the six targeted plants without a license, according to one of those people. It is unclear when the US will move ahead with these additional restrictions, the people said.

In addition to deterring China from upgrading its semiconductor technology, the new US-Dutch controls may reduce Chinese firms’ existing production capacity for relatively advanced chips over time. The country has limited domestic alternatives for repairing or replacing broken foreign equipment. ASML has a virtual monopoly on critical lithography gear that’s required to make both advanced and legacy chips around the world.

The Biden administration imposed similar controls on the maintenance and repair of American chipmaking with its original export control rules last October. Those restrictions affected ASML’s US peers, including Applied Materials Inc, according to Bloomberg report.

(Gao J)