Dutch curb on microchip tech exports for China could become EU-wide, says Valdis Dombrovskis

The decision taken by the Dutch government to restrict exports of advanced microchip technology to China might be expanded to a European Union-wide scope, says Valdis Dombrovskis, the European Commission Vice-President in charge of trade relations.

“The way export controls function in the EU, it’s a national decision. But there is a possibility also to bring this decision (to) the EU level. The Dutch authorities have indicated they have this interest,” Dombrovskis said on Friday morning ahead of an informal meeting of trade ministers in Stockholm.

“There are going to be discussions with relevant member states, which also have advanced semiconductor manufacturing, whether to extend the application of these export controls broader.”

The Dutch curb has been the source of speculation for months but was only made official on Wednesday in a government letter addressed to the country’s parliament.

The Netherlands is home to ASML, an international firm specialised in the sophisticated machines needed to produce the microchips that power smartphones, PCs, cars and billions of everyday appliances.

ASML is the only company in the world able to manufacture extreme ultraviolet lithography (EUV) machine, an apparatus of extreme complexity and precision that is used to assemble the most advanced version of semiconductors.

These EUV machines are as big as a small bus and command a price tag of €150 million apiece. Multinationals like TSMC, Intel and Samsung employ ASML-made machines to mass-produce microchips.

Headquartered in the town of Veldhoven, ASML is today Europe’s largest tech company in terms of market capitalisation, providing the entire bloc with a competitive edge on a global scale.

This superiority has thrust ASML – and, by extension, the Netherlands – into the very forefront of the geopolitical rift between the United States and China, as the White House actively rallies Western allies to take a tougher stance on Beijing and block the trade of cutting-edge supplies.

Months of lobbying paid off on Wednesday when Dutch Foreign Trade Minister Liesje Schreinemacher officially announced “additional national export control measures” for the technology required to fabricate advanced semiconductors.

Schreinemacher did not explicitly mention either China or ASML but spoke of a “geopolitical context” that called for strict export rules “in the interests of national and international security.”

The letter, a translated version of which was shared with Euronews, listed three “strategic goals” to argue the decision: to prevent Dutch goods from being used for “undesirable” purposes, to avoid long-term dependencies on foreign suppliers, and to preserve Dutch leadership in the field.

“The government does not view this export control framework in isolation, but as part of a broader effort designed to benefit the semiconductor value chain,” the letter reads.

According to Schreinemacher, the Netherlands has held “close consultations” with the European Commission and fellow member states to explain the decision and “gain support for it.”

“In the months ahead, the government will continue these efforts with a view to establishing the national control list in the EU landscape as effectively as possible,” the letter says.

Emerging tech risks

On Friday morning, Dombrovskis followed up on the letter and opened the door for the Dutch decision to acquire a greater European dimension, although he did not specify how this would work in practice.

Dombrovskis, however, did mention China by name, as well as Taiwan, the island that is today the world’s largest supplier of microchips and that Beijing considers to be a breakaway province.

“Looking at the current geopolitical context of different emerging technologies, we need to handle the new risks emerging with them,” Dombrovskis told reporters.

“We are also taking a broader look at how we could have a stronger European framework for export controls (and) a more coordinated and streamlined system at the EU level because currently, it’s very much a member state-driven and any decision making is bottom up.”

Under a 2021 regulation, the EU established a common list of dual-use items whose exports must be meticulously monitored by member states.

Dual-use items refer to products that can be employed for military and civilian purposes. Many of the products currently listed relate to the production of nuclear, chemical and biological weapons.

Individual countries are entitled to add additional export controls on key products which they consider warrant closer surveillance, like the Netherlands has done with lithography systems.

Export controls are not technically a ban: the government is free to decide if it grants a licence export to a specific company for a specific product meant to be sent to a specific country.

Member states, therefore, operate on a case-by-case basis. Proper export bans are conducted through the EU’s sanctions regime, as is the case with Russia.

The Dutch government still needs to translate Wednesday’s announcement into legislation, a process that could take months before any trade is actually restricted.

In a reaction statement, ASML said it would need to apply for export licences for the most advanced versions of its deep ultraviolet (DUV) lithography systems.

Its internationally coveted EUV tools “have already been restricted since 2019,” the company said.

“Based on today’s announcement, our expectation of the Dutch government’s licensing policy, and the current market situation, we do not expect these measures to have a material effect on our financial outlook that we have published for 2023 or for our longer-term scenarios.”