China Complains that the U.S. has ‘Weaponized’ Chip Export Controls

China Complains that the U.S. has ‘Weaponized’ Chip Export Controls

Last summer, my Legal Insurrection colleague Vijeta Uniyal reported that despite U.S. sanctions, China was building up its chipmaking capabilities at breakneck speed by importing manufacturing equipment at a record pace.

However, later in the year, the U.S. indicated it was planning to update new chip restrictions on exports to China related to the rapid development of artificial intelligence (AI) capabilities. This came as China implemented its own restrictions on minerals needed to produce semiconductors and other advanced technology.

Now comes news that the Netherlands has blocked the export of equipment to China, which it needs as part of its chipmaking process.

The Netherlands has blocked chip-equipment manufacturer ASML’s exports to China of some lithography systems, which are essential to making advanced microprocessors, in a partial license revocation following U.S. export restrictions.

The Netherlands-based company said Monday that the Dutch government recently partially revoked an export license for shipping the NXT:2050i and NXT:2100i lithography systems to China in 2023.

Dutch semiconductor companies have had to seek government permission since September before they can sell some advanced types of chip-making equipment abroad, the Dutch government said in June. The rule came after national-security officials from the Netherlands, Japan and the U.S. reached an agreement to start restricting such exports, aiming at limiting China’s access to advanced semiconductor technologies.

This is a non-trivial move by the Dutch company.

In recent years, China has been ASML’s third-largest market after Taiwan and South Korea, but it was the biggest in the third quarter of 2023, with 46% of the company’s sales.

In 2023, the United States announced rules giving Washington the right to restrict the export of ASML’s “Twinscan NXT1930Di” machine if it contains any U.S. parts.

Soon after, several Dutch lawmakers challenged the Netherlands’ Trade Minister over whether the United States had acted correctly in unilaterally imposing rules regulating the export to China of another ASML chipmaking machine.

“In recent discussions with the US government, ASML has obtained further clarification of the scope and impact of the US export control regulations,” the semiconductor equipment maker said in a statement.China is now complaining about the move.

China is complaining about the new restrictions, stating that exports have been weaponized.

China’s Ministry of Commerce said Thursday the U.S. is weaponizing export controls and using them as a tool.

”We are highly concerned about the United States’ direct intervention and interference in the issue of high-tech exports by Dutch companies to China,” spokesperson Shu Jueting said at the ministry’s first press conference in 2024, according to a CNBC translation of her Mandarin-language remarks.

“The United States has instrumentalized and weaponized export control issues,” she said, calling for the Dutch side to “respect the spirit of the contract and support businesses in conducting compliant trade.”

She was responding to a question about ASML, the Netherlands-based company that makes lithography machines that are key to manufacturing advanced semiconductors.

It will be interesting to see how much further “Chip Wars” escalate.

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