Dutch chip toolmaker ASMI warns of escalating trade tensions

The head of Europe’s second-largest semiconductor equipment maker has warned that the US is turning up the heat on its allies to ensure key global chip companies fall into line behind Washington’s tough export controls on China.

Benjamin Loh, chief executive of Dutch-listed ASM International, which develops equipment for the production of semiconductor wafers and chips, said the US was “putting a lot of pressure . . . to make sure that the Dutch government and the Japanese government follow as well”.

He added: “The US government is hoping that this is going to be a multilateral thing going forward because they need to stop everybody [selling high-end tools to China].”

Loh’s comments come as Alan Estevez, the top US commerce department official for export controls, and Tarun Chhabra, the White House National Security Council official who drove the process to impose unilateral controls on October 7, prepare to hold talks with Dutch officials in the Netherlands this week.

President Joe Biden’s administration has been trying to reach a trilateral deal with its allies for well over a year, as part of its strategy to make it much harder for China to develop advanced semiconductors needed for military purposes, but failed to secure an agreement in time.

ASMI is one of two major chip toolmakers in Europe, alongside rival Dutch group ASML, which is Europe’s largest and most important company in the chip sector.

This month, ASMI issued the most severe estimate of the hit from the US export controls of any major European chip company, warning it would affect about 40 per cent of sales to China, which has grown to account for 16 per cent of group revenue.

“China is not a small amount of our business, but at the same time it’s not something that will kill us,” Loh said, noting that ASMI’s “sizeable operation” in Arizona in the US made it more exposed to Washington’s sanctions.

The toolmaker, which receives more than half of its revenues from sales of equipment for advanced chips, is still assessing whether the cautious estimate is accurate, Loh said, but “in hindsight it is maybe not such a bad thing — being very conservative — because I think we have not seen the end of this yet”. 

Loh said its Chinese customers were “struggling now, trying to get all the different pieces” they needed to build their planned manufacturing lines.

Even if they were ultimately able to buy more equipment than anticipated from ASMI, Loh added, the lack of access to crucial US resources would make it “very difficult for Chinese advanced fabs to continue going forward”.

The US export controls, which bar American companies from exporting critical chip manufacturing tools to China and prevent “US persons” from providing the country with direct or indirect support, have immediately hurt the three biggest US chip toolmaking companies: Applied Materials, Lam Research and KLA.

But they have had much less impact on the other two non-US companies that dominate the global market — Tokyo Electron in Japan and ASML.

Estevez last month said US companies wanted “fairness”, which in the case of toolmakers meant “multilateral” export controls. “We intend to give them that as well so that it’s fair with their competition across the globe,” he added.

In recent comments, Estevez said he was confident the three countries would strike a deal in “the near term”, but many industry experts believe that timeline is overly optimistic given the concern in Tokyo and, particularly, The Hague.

Underscoring the less optimistic view, Dutch foreign trade minister Liesje Schreinemacher has in recent days suggested the US faces a difficult battle.

Speaking to the Dutch parliament last week, Schreinemacher said the Netherlands had to “defend our own interests”, which she said included economic interests.

In an interview with a Dutch newspaper this month, Schreinemacher said the Netherlands would look at the chip market with “a more critical eye” but cautioned it would not just “copy the American measures one-to-one”.

Her comments marked the first time the Dutch government has even indirectly referred to the negotiations it has been holding with the US and Japan.

One person familiar with the US talks with the Dutch and the Japanese said the Biden administration was committed to securing a trilateral agreement. “We’ve obviously seen the [recent] comments from the Dutch. I would just say that there are also private conversations going on,” said the person.

Additional reporting by Javier Espinoza in Brussels and Manuela Saragosa in London