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Attack on Taiwan? #NationalSecurity, ASML: "we can remotely cripple TSMC's lithography machines"

Industrial production of high-end chips will not fall completely into the hands of China

"In the event of a mainland Chinese attack on Taiwan, ASML and TSMC are capable of crippling the machines that produce chips."

On May 21, Bloomberg quoted two sources as saying that U.S. officials had privately expressed to Dutch, Chinese and Taiwanese officials their concerns about the consequences of a China attack on Taiwan.

The lithography machine produced by the company displayed on ASML's website.

However, photolithography manufacturer ASML assured Dutch officials that it was able to remotely disable appropriate machines, including the latest generation of extreme ultraviolet (EUV) lithography.

Taiwan currently produces the vast majority of the world's advanced chips, so the U.S. government has privately expressed its concerns about a conflict in the Taiwan Strait to Dutch officials and Taiwan authorities, said two sources, who declined to be named.

When the Dutch government discussed the issue with ASML, the other two sources said, the latter assured officials that the company has the capability to stop remote machine operations and that it has conducted simulations of a possible battle to properly assess the risks.

Spokesmen for ASML, TSMC, and the Dutch Ministry of Trade would not comment. Spokesmen for the White House National Security Council, the U.S. Department of Defense and the U.S. Department of Commerce did not respond to emailed requests for comment.

TSMC is a key customer of ASML and about 92 percent of the world's most advanced chips are made in Taiwan.

EUV machines require frequent maintenance and, without spare parts provided by ASML, would soon stop working, the sources said. On-site maintenance of EUV machines is challenging because they are housed in aseptic chambers and require technicians to wear special suits to avoid contamination.

ASML offers joint service contracts to certain customers to perform some routine maintenance work themselves, thus allowingTSMC access to its machine systems. ASML also stated that it cannot access customers' proprietary data.

During the Taiwan Affairs Office's regular press briefing on May 15, a reporter asked that Al Perovich, a think tank scholar who has served as an adviser to the U.S. Department of Homeland Security and Department of Defense, had recently published an article advocating the use of "sabotage of TSMC's equipment" and other means to make China understand that by "forcibly breaching Taiwan" it is not possible to acquire TSMC's company as well."

Chen Binhua, a spokesman for the Taiwan Affairs Office of the State Council, said that for some time now, "anti-China U.S. forces have been using TSMC as a 'weapon,' often launching comments such as "blowing up TSMC," "destroying TSMC equipment," and "remotely crippling TSMC."

In recent times, the Biden administration has repeatedly stepped up pressure on the Dutch government, "forcing" it to cooperate with the United States in creating a "blockade" of China's advanced semiconductor industry.

Among other things, the Dutch government has been asked to prevent its own photolithography giant ASML from providing after-sales services such as repairs for "limited" chip-making equipment purchased by Chinese customers before the current sales ban went into effect.

Peter Wennink, chief executive officer of AsSML, said last month that there was no reason why the company could not service equipment already sold to Chinese customers and that there were no service restrictions on equipment installed in China.

In the first quarter of this year, ASML's revenue from China accounted for 49 percent, or about 2 billion euros. The company's previous largest markets, Taiwan and South Korea, accounted for a still low share of the company, only 6 percent and 19 percent, respectively.

On April 17, Dutch lithography giant ASML released its 2024 quarterly report, achieving net sales of 5.3 billion euros (about 40.8 billion yuan), down 21 percent year-on-year and 27 percent sequentially; net income of 1.2 billion euros, down 40 percent year-on-year and up 40 percent sequentially; and a gross profit margin of 51.0 percent, up 0.4 percentage points year-on-year and down 0.4 percentage points sequentially.

As of the first quarter of this year, China, traditionally ASML's third largest market, has been its largest market for three consecutive quarters, with revenue shares of 46 percent, 39 percent and 49 percent, compared with just 8 percent in the first quarter last year and 24 percent in the second quarter.

ASML: U.S. moves. Dutch company must not fall into Chinese hands

To block China's technological development, the U.S. will put pressure on the Netherlands. It is appropriate for the US and EU to cooperate defensively and offensively toward China. There is an battle going on in the global economic and trade system, and it should be an imperative that like-minded nations work together to emerge victorious.

On April 5, Reuters, citing two people familiar with the matter, exclusively reported that the Biden administration intends to put pressure on the Netherlands next week, with the intention of preventing the leading Dutch chip equipment manufacturer (ASML) from providing some instrument repair services to China.

Alan Estevez, the Biden administration's export policy chief, is scheduled to meet with the Dutch government and ASML staff in the Netherlands next Monday to discuss maintenance service contracts, people familiar with the matter said. At that time, Washington may also seek to add a new name to the list of Chinese chipmakers who cannot receive Dutch equipment.

The Dutch Foreign Ministry confirmed the upcoming meeting, but did not specify what topics would be discussed. It responded to Reuters by saying, "The Netherlands always has good discussions with our partners. Monday's meeting between officials is an example of this."

Photolithography is a key equipment for chip production, and Dutch ASML is the world's largest photolithography manufacturer and the only supplier of extreme ultraviolet (EUV) lithography.U.S. pressures on ASML will begin in 2019.

Last year, Japan and the Netherlands followed the U.S. example, using "national security" as an excuse to ban China from acquiring certain chip-making technologies. But the Dutch restrictions have not reached the level of the United States, which has banned U.S. companies from repairing equipment for advanced Chinese factories. Estevez has said publicly that the United States is asking its allies to prevent local companies from servicing certain chip-making equipment for Chinese customers. At an export control conference last week, he said, "We are working with our allies to determine which repairs are important and which are not."

In response to the U.S. forcing the Netherlands into science and technology embargoes against China, Foreign Ministry spokesman Wang Wenbin responded that China has always opposed the U.S. generalization of the concept of national security and the coercion of other countries into science and technology embargoes against China under various pretexts. China urges the Dutch side to uphold an objective and fair position and market principles, abide by the spirit of the contract and take concrete actions to safeguard the common interests of China and the Netherlands and the enterprises of both sides. China will pay close attention to developments in the matter and will vigorously safeguard its legitimate rights and interests, Beijing said.

From March 26-27, Dutch Prime Minister Rutte traveled to China for a working visit, his first visit to China in five years. In an interview with the media, Rutte declined to answer whether the Dutch government would follow the U.S. government's request to prevent ASML from continuing to provide services to Chinese customers. He said, "When it comes to our semiconductor industry and companies like ASML, when we have to take (export control) measures, the Netherlands will make sure that these measures are not specifically aimed at one country."

According to Rutte, the Netherlands will always try to minimize the impact and avoid a ripple effect on the supply chain, and thus on overall economic relations.

Upon his return to the Netherlands, Rutte was faced with another thorny issue: the fact that ASML "wants to leave."

On March 28, the Dutch government reportedly announced that it would spend 2.5 billion euros (about 19.487.6 billion yuan) to improve transportation and other infrastructure in the Eindhoven area, where ASML is headquartered, to ensure that ASML remains in the Netherlands and does not move its operations abroad. Meanwhile, to alleviate the concerns of some domestic blue-chip companies, the Dutch cabinet is preparing to take measures to reduce the tax burden on businesses, the report says, citing an official statement.

ASML welcomed the news, but did not explicitly state whether it will remain in the Netherlands. In a statement, the company stressed that "the decision we have to make is not whether we will stay, but where we will grow."

Why does ASML have strategic importance?

ASM is a Dutch photolithography company that has developed the unique advanced extreme ultraviolet (EUV) lithography instrument.

The machine consists of several modules incorporating hundreds of thousands of components from multiple levels of nearly 800 global suppliers. The modules are built at 60 ASML locations around the world and shipped to the Netherlands for assembly

This technology was also developed with U.S. technological collaboration. Today ASML, which took 20 years to produce the machine with billion-dollar investments, is the only company in the world that can employ this tool.

If Chinese industry were to acquire such machinery, it would be able to reproduce it in three years, warned Nazak Nikakhtar, adviser to the U.S. Department of Commerce.

It is appropriate for the US and EU to cooperate defensively and offensively toward China. There is an battle going on in the global economic and trade system, and it should be an imperative that like-minded nations work together to emerge victorious.

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