The tragedy of Chinese lithography machines: ASML has shipped more than 700 units, but EUV is being watched closely by the United States

The Netherlands exports EUV lithography machines to China. Will Biden agree?

China needs lithography machines, especially high-end lithography machines that support advanced processes.

Specifically, it is the EUV (extreme ultraviolet light source) lithography machine.

At present, there is only one company in the world that can manufacture  EUV  lithography machines, and that is the Dutch lithography machine giant ASML (Chinese name: ASML). In fact, as a foreign company, ASML has entered the Chinese market for more than 30 years and can be said to have a deep connection with it.

However, due to non-commercial reasons, ASML is unable to export EUV lithography machines to the Chinese market, although it is actually very willing to do so.

The culprit behind this is still the United States.

1. ASML’s deep connection with the Chinese market

The Chinese mainland market has always been one of ASML's most important markets worldwide.

Taking 2020 as an example, ASML sold a total of 61 lithography machines (including new and second-hand equipment) in the second quarter and 60 in the third quarter - of which more than 24 were sold to mainland China.

According to Shen Bo, ASML's global vice president and president of China, in the second and third quarters of 2020, the number of lithography machines shipped by the company to mainland China exceeded 20% of the global total.

Of course, these lithography machines sold to mainland China do not include EUV equipment.

In this regard, Shen Bo said:

ASML must export lithography machines under the premise of complying with laws and regulations. However, we are very open to exporting lithography machines to China. We treat all global customers equally. As long as we can provide technology and equipment, we will fully support them.

It can be seen that if external factors are excluded, ASML itself is very sincere in cooperating with China.

Leifeng.com learned that ASML was founded in 1984; at that time, there were still many companies producing photolithography machines on the market, and ASML ranked last. However, in just two years, ASML developed a wafer stepper model PAS2500, which can produce VLSI generation chips, which enabled ASML to gain a firm foothold in the market and gain a certain reputation.

It is worth mentioning that as early as 1988, when ASML entered Asia, it sold the earliest equipment to China.

After more than 30 years of development, ASML has sold more than 700 lithography machines in mainland China, covering most types of ASML's products (except EUV equipment).

Not only that, based on the branch established in Tianjin in 2000, ASML currently has 12 offices, 11 warehousing and logistics centers, and 2 technology development centers (Shenzhen and Beijing, doing computational lithography, measurement, etc.) in China, with more than 1,000 employees.

In addition, ASML has also built a special training center in China to cultivate talents in the lithography industry.

As Shen Bo said, while complying with laws and regulations, ASML fully supports its customers and the development of China's integrated circuit industry. ASML and the Chinese integrated circuit industry have had good cooperation at every stage.

He also said that ASML's overall condition in China is getting better and better, its services will be more diversified in the future, and its investment in China will increase.

2. The fundamental reason why EUV lithography machines cannot be exported to China is the United States

As the world's largest lithography machine company, ASML alone enjoys the commercial development convenience brought by EUV lithography technology, but at the same time it also has to bear the heavy political shackles under the competition and conflict among major powers.

A typical case is the obstruction of EUV lithography machine exports to China.

The EUV lithography machine is the fifth generation of lithography machines in its development process. Due to the use of extreme ultraviolet rays, its minimum industrial node has reached 22nm-7nm. It can be said to be the most advanced lithography equipment in the world - and only ASML can produce this kind of equipment.

ASML has also gone through a difficult journey in the research and development of EUV technology.

In fact, ASML started the research and development of EUV lithography machines in 1999 and originally planned to launch the product in 2004, but it was not until 2010 that the first EUV prototype was developed, and it was not until 2016 that downstream customers were supplied. It was not until 2019 that the first 7nm EUV process chip was commercialized.

However, under the influence of the US-led Wassenaar Arrangement, the export of this high-end equipment to China was strictly restricted - until 2018 when things started to improve.

In April 2018, SMIC ordered an EUV lithography machine from ASML worth US$120 million, which was expected to be delivered in early 2019. After the incident was reported, ASML responded that it treats global customers, including Chinese customers, equally, and that selling EUV lithography machines to China does not violate the Wassenaar Arrangement.

At the time, the Dutch government did issue an export license to ASML.

However, the deal was hampered from the start. According to people familiar with the matter, the United States immediately set its sights on the deal - in the following months, US officials met with Dutch officials at least four times to discuss whether to block the deal outright.

But to make matters worse, on December 1, 2018, a major fire broke out at a factory of ASML's component supplier Prodrive. ASML publicly stated at the time that shipments in early 2019 were expected to be delayed.

Meanwhile, the U.S. government continues to work behind the scenes on the deal.

Around New Year’s Day 2019, U.S. Department of Defense officials discussed the “security risks” of the deal with the Dutch Embassy in Washington; then in June 2019, U.S. Secretary of State Pompeo visited the Netherlands and again put pressure on the Dutch government to stop the deal.

It is worth mentioning that on June 30, 2019, the export license issued by the Dutch government to ASML expired.

In July 2019, Dutch Prime Minister Mark Rutte visited the United States, where senior White House officials showed him an intelligence report on the so-called "possible consequences of China obtaining lithography machines." According to Reuters, shortly after the visit, the Dutch government decided not to renew the license - ASML has not appeared on the renewal list in the Dutch Ministry of Foreign Affairs database since then.

Since then, ASML's official statement on the export of EUV lithography machines to China has been that the company is still waiting for approval of the new license application. In response to media reports on the pressure from the United States, the Dutch Ministry of Foreign Affairs also stated on January 15, 2020:

The Dutch government weighs economic and security interests when deciding whether to issue an export license.

As a result, ASML's plan to sell EUV lithography machines to the Chinese market has been shelved.

3. Summary

In 2020, as the United States cracked down on China's semiconductor sector, Chinese people paid more and more attention to lithography machines, and ASML also attracted attention.

However, whether or not ASML can sell EUV lithography machines to China is beyond its control.

What is certain is that ASML has been very active in selling lithography machines to the Chinese market. According to the latest statement by Shen Bo, president of ASML China, ASML has submitted an application to the Dutch government to export EUV lithography machines and is currently waiting for an export license from the Dutch government.

The Dutch government is still waiting for the attitude of the US government.

Of course, there is uncertainty in the current attitude of the US government. Trump is certainly not interested in considering this matter right now. I am afraid that everything will have to wait until the new US government officially takes office next year.