U.S. Moves to Ban ASML Equipment Crucial to China’s Chip Industry Development

China’s semiconductor sector is on the brink of facing a significant disruption as US lawmakers advance efforts to prohibit the export of crucial equipment from ASML, which is vital for lithography processes.

US Lawmakers Propose Ban on ASML’s DUV Technology Exports to China, Targeting Huawei, SMIC, and Others

For an extended period, China has been grappling with US-imposed export restrictions, particularly within the semiconductor industry. The situation worsened when the US government enacted an indirect ban on the export of extreme ultraviolet (EUV) equipment produced by ASML in the Netherlands. This action prompted Beijing to intensify its initiatives to develop a self-sufficient chip supply chain. However, such restrictions have hindered China’s ability to advance its semiconductor manufacturing processes, effectively limiting the country to a 5nm capability. In light of these challenges, the Foreign Relations Committee’s recent press release highlights ongoing discussions surrounding the MATCH Act, which aims to extend bans to include deep ultraviolet (DUV) technology.

This bipartisan legislation modernizes U. S.export controls to ensure adversaries cannot buy “chokepoint”semiconductor manufacturing equipment (SME) technology from the United States or our partners that they cannot build themselves.

By promoting harmonization of export controls among allies and closing servicing and entity-specific loopholes, the MATCH Act preserves the U. S.technological lead in the AI competition with China.

– US Senator Jim Risch

Understanding the critical role of DUV lithography equipment in China’s semiconductor landscape is essential. This technology remains the only viable option for fabrication facilities (fabs) within the country. Chinese semiconductor leaders such as Huawei, SMIC, and Hua Hong, along with memory chip manufacturers like CXMT and YMTC, rely extensively on DUV technology for their operations. For instance, SMIC employs ASML’s DUV equipment to achieve N+1/N+2 7nm-class processes through multi-patterning techniques. Meanwhile, CXMT and YMTC depend on DUV machines to enhance their memory production capabilities. Thus, any potential ban on DUV technology could severely hinder these companies’ capacity expansion efforts.

The MATCH Act suggests restrictions on the “sale or servicing”of DUV immersion technology, arguing that such equipment is being utilized to upgrade China’s military capabilities. This Act also proposes that all aforementioned Chinese entities utilizing DUV technology would face limitations akin to those under the existing Entity Act, restricting their access to international markets. Although the MATCH Act is currently in the legislative pipeline and has yet to be enacted, its prospect signals serious implications for a crucial segment of China’s semiconductor supply chain.

An individual in protective clothing operates an ASML TWINSCAN machine in a cleanroom environment.

Interestingly, DUV procurement from domestic suppliers in China was projected to rise in the upcoming quarters, with firms like CXMT and YMTC investing significantly in new production facilities. However, according to the latest fiscal report from ASML, Chinese revenue – primarily from DUV sales – constituted nearly 20% of the company’s total revenue. With the MATCH Act potentially formalizing restrictions, ASML may confront new geopolitical challenges, as it faces limitations in accessing one of the world’s largest semiconductor markets.

China’s dependence on DUV technology has increased over the past several years. Although the domestic semiconductor industry has made strides in developing in-house lithography equipment, these efforts have primarily focused on older technologies, such as the 28nm process. Higher-end processes remain heavily reliant on ASML’s innovative technology, making the implications of US legislative actions particularly problematic for Chinese semiconductor manufacturing.

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