ASML, China, and Dutch national security interests

18 July 2023

On 30 June 2023, the Dutch government announced new restrictions on the export of semiconductor equipment. Although the government claims its policy to be “country-neutral”, it is widely understood that these restrictions are aimed primarily at the relationship between ASML — currently the largest supplier for the global semiconductor industry and the most highly valued European tech company — and its customers in China. According to Dutch Minister for Foreign Trade and Development Cooperation Liesje Schreinemacher, “we’ve taken this step on national security grounds. It’s good for the companies that will be impacted to know what they can expect. This will give them the time they need to adapt to the new rules”. Indeed, the announcement provides long-anticipated technical details on the kinds of equipment that the new restrictions cover, the procedural requirements (for instance, sales outside the EU require an export permit), and the date on which the new rules will become effective (1 September 2023). This is important information for ASML, its suppliers, customers, and investors.

Why further restrictions?

However, the government is not very clear about why it decided to further limit the export of semiconductor equipment, considering it has been blocking the sale of ASML’s most advanced machines to China since 2019 already. Mainland China constitutes the third-largest market for ASML, after Taiwan and South Korea., and before 2019, the Dutch government had given ASML a license to sell an EUV (Extreme Ultraviolet Lithography) machine to a Chinese customer. However, after an “intensive campaign” by the Trump administration, the Dutch government decided not to renew the permit. As a result, ASML has been unable to export EUV machines to China, and instead only exported the less cutting-edge DUV (Deep Ultraviolet Lithography) machines to the country.

In 2019, the Dutch authorities did not comment on why they withdrew the permit. This time, the government’s press statement gives some explanations for the new export restrictions (which cover the most advanced type of DUV machines) referring to “national security grounds” and “national security risks”. These risks are allegedly related to the fact that advanced semiconductor equipment “can make a key contribution to certain advanced military applications”, and that “the Netherlands bears an extra responsibility in this regard because this country has a unique, leading position in this field”.

Given the potential geopolitical consequences of the Dutch assumptions for EU-China relations and transatlantic security cooperation, the Dutch government should be more explicit about its considerations for further restricting semiconductor equipment exports.

The Government Gazette of the Netherlands is somewhat more specific. It points to two overlapping concerns that motivate the new restrictions (as translated and paraphrased by me). The first is that semiconductors made with relevant equipment and technology could end up in the hands of an actor who uses them for military purposes that undermine Dutch 'public security interests', including international peace and stability. The second is that the export of relevant equipment and technology could have significant long-term implications for the 'public security interests' of the Netherlands and its allies. These implications include, but are not limited to, the development of advanced weapons systems.

It is notable that in the Gazette the government uses the term “public security” instead of the “national security” to which Schreinemacher referred in the press statement. Seemingly, this emphasises the broad security interests of the general public, which are more clearly defined and seem more relevant in this context than those of the state.

Which security interests?

The text is not explicit about which security interests are at stake or how these are threatened. Based on the information made available by the government, three considerations seem to play a role. First, there appears to be an assessment that the Chinese government uses or will use advanced semiconductors in ways that harm Dutch national (or public) security — perhaps by enhancing its capability to conduct cyber-attacks against Dutch targets. The General Intelligence and Security Service of the Netherlands recently called Chinese data theft the biggest threat to Dutch economic security. It is also possible that the Dutch government takes into account the possibility of a military incident at sea, as it occasionally sends warships to East Asia (the next naval mission is planned for 2024).

Second, the text implies that the Chinese military is posing a threat to regional stability in Asia. China's use of military means to threaten and put pressure on Taiwan, and the central role of the Taiwan issue in the regional security order in East Asia, are likely key elements in the Dutch government's assessment of such a threat.

Third, in conjunction with media reports that the US government has been exerting pressure on the Netherlands to restrict exports of semiconductor equipment, the Gazette text also hints at the technological and military balance of power between China and the US. The US government has made it clear that it expects allies — especially those with a strategically important semiconductor sector — to support American restrictions on advanced technology transfers to China. Therefore, the decision of the Dutch government was likely influenced by American expectations towards its European ally.

Several assumptions

These considerations, if they are indeed underlying Dutch policy on the export of semiconductor equipment, suggest that the government operates on several assumptions that deserve due attention. Some of these assumptions seem to be of a technical nature and include the relationship between ASML’s products, Chinese semiconductor-based capabilities, and the national security vulnerabilities of European countries. In other words, there must be a reason why the government believes that China’s potential ability to manufacture certain types of more advanced semiconductors is posing dangers for Dutch national security — other, less advanced, chips presumably involve no significant threat.

Other assumptions are geopolitical, such as the dynamics of the regional security order in East Asia and how these link to European security issues. This could mean that the government believes that denying China access to advanced semiconductors is integral to preserving peace and stability in East Asia. Alternatively, it could mean that supporting the US approach to regional security in Asia — even though there is no clear unified European approach to this — is a requirement for maintaining European security, given America’s balancing power against Russia.

These geopolitical considerations, if they indeed play a role, would be problematic. Preventing China from producing advanced computer chips based on foreign technology is unlikely to stop the country from further developing its military power. Also, while Beijing’s expanding power is destabilising the Indo-Pacific region, it is not the only source of instability — the US gradually changing its Taiwan policy by increasing its military and political ties with the island is another. European support for the United States’ geopolitics in Asia will not necessarily contribute to keeping peace in Europe. An increase in tensions in Asia is likely to spill over into EU-US relations and thereby into European politics. Given the potential geopolitical consequences of the Dutch assumptions for EU-China relations and transatlantic security cooperation, the Dutch government should be more explicit about its considerations for further restricting semiconductor equipment exports.

DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.

Author biography

Frans-Paul van der Putten is an independent, Netherlands-based researcher and consultant, and the founder of ChinaGeopolitics. He also is co-founder of Taiwan Radar, co-founder and former coordinator of the Clingendael China Centre, and a former chief editor of the Journal of Imperial and Global Interactions, Itinerario. Image credit: Flickr/Jerry Lai (cropped).

This is a revised version of an article previously published on ChinaGeopolitics.