‘US-China Chip War Stops Europe Before Blocking’

A visit to China by Minister Wopke Hoekstra (Foreign Affairs) has made it clear that the Netherlands is embroiled in a chip war between the US and China. ‘It’s time to show our colours,’ says high-tech expert Paul Verhagen.

Earlier this year, the Netherlands agreed to an export ban on chip machines from ASML to China. A wish from the US, Japan has also signed on. An important theme turned up during the conversation between Hoekstra and his colleague today. China emphasized their concerns, and so did Hoekstra. But it hasn’t turned out to be very concrete,’ says Chinese correspondent Anuk Eigenram.

Also Read | Chip War Breaks Out, China Blocks Imports From US

The crème de la crème

ASML’s export ban on chip machines only applies to the latest high-tech EUV machines. ‘That’s the crème de la crème, each one the size of a truck costs about 125 million euros,’ says FD journalist Peter Couenberg. This means that older generations may still be exported to China. There is currently no restriction on this.

But according to Paul Verhagen, a senior technologist at the Hague Center for Strategic Studies, China mainly wants to know how far the export ban goes in practice. ‘They want those machines from ASML. If that’s not possible, they want to know where they stand.’ While the U.S. has specified that chip machines cannot be used for military applications, it’s unclear how firm the ban is.

Also Read | The AI ​​race between the West and China threatens to escalate

Military objectives

This makes the conversation difficult for Minister Hoekstra, Couwenbergh thinks. ‘The Americans are in charge.’ Additionally, it clashes with ASML’s politics. ‘They have always said: We provide machines to anyone. You can not only make chips with it, but scanners, cars, but also for military purposes.

In that sense, the Netherlands is embroiled in a chip dispute between the US and China. A difficult position, but with advantages, thinks Couwenbergh. ‘ASML is currently on a golden hill. This technology is exclusive to them, which means they have a monopoly on making chip machines.’ China, the US and Europe will invest billions in the chip industry in the coming years. And only ASML can provide the machinery for this, Couwenbergh insists. ‘The order book is bloated, they won’t have to worry about this for the next ten years.’

Also Read | China is developing new technology programs in response to export restrictions

Verhagen also thinks the problems for ASML are not yet over. ‘Currently, only those EUV machines have restrictions, not DUV machines. But America wants it, the question is when. That’s why Verhagen thinks it’s in the Netherlands’ interest to extend the ban on DUV machines as long as possible. But at some point it stops. China is a very large economy and accounts for a large portion of ASML’s revenue.’

According to Couwenbergh, this blow can be cushioned by increasing demand from other countries. ‘India wants its own chip factory, Europe is investing billions, Taiwan is key and Intel is building a mega-factory in the desert of the US state of Nevada.’

Also Read | The high-tech sector Twente is building a new chip factory

Arms race

Earlier this week, China decided to ban exports of chips from US Micron. This caused a rift in the relationship between the two countries. The ban will not affect the Netherlands anytime soon. “China wants to argue with the US, but they want to keep Europe on board.” The conflict between the US and China is likely to escalate. According to Verhagen, this could lead to an ‘arms race lasting decades’. ‘In the field of artificial intelligence, quantum computers and all sorts of new technologies with obvious civilian and military applications.’

This creates an embarrassment for Europe, the Netherlands, Verhagen believes. ‘We have to show colour. Do we go with the Americans or do we go with the Chinese? Militarily you choose the Americans, but economically you choose China. Both sides have advantages and disadvantages.’