U.S. Pressures ASML to Halt Sales to China as China Begins Mass Production of Domestic DUV Lithography Machines

Dutch media outlets NL Times and NU.nl reported that the U.S. government is pressuring the Netherlands to prohibit ASML from selling almost all semiconductor manufacturing equipment to China, including deep ultraviolet (DUV) lithography systems.

The primary goal of this move is to hinder China’s development of artificial intelligence (AI), supercomputers, and military technologies. Under previous U.S. pressure, the Dutch government had already banned ASML from exporting its most advanced extreme ultraviolet (EUV) lithography systems to China. Since 2019, ASML has not shipped any EUV systems to China, and certain advanced DUV systems have also been subject to export restrictions.

Now, these restrictions may expand further. The U.S. Congress is currently reviewing the bipartisan 'Multilateral Action on Critical Hardware' (MATCH) Act, which requires allied nations to align their export control policies with those of the United States.

If passed, the legislation could not only prevent ASML from selling DUV systems to China but also prohibit maintenance and servicing of already delivered equipment. Should the Netherlands refuse to comply, the U.S. may impose sanctions. Given ASML’s heavy reliance on American-supplied components, the U.S. has previously threatened to cut off supplies to exert pressure.

Dutch officials are currently lobbying actively in Washington, seeking to remove relevant clauses from the bill. However, the MATCH Act enjoys support from both Democrats and Republicans and is expected to be included in the defense budget bill—almost certain to pass—leaving little room for reversal.

Notably, the bill leaves more flexibility for American companies. China had previously discovered that by combining advanced etching techniques with DUV lithography systems, it could produce advanced chips typically requiring EUV equipment.

Although the U.S. imposed partial restrictions on such etching equipment in 2024, the final version of the MATCH Act removed bans on U.S. firms broadly selling advanced etching machines to China, while maintaining restrictions on ASML’s DUV systems.

Facing the risks of equipment supply cutoffs and interrupted maintenance, China’s semiconductor industry is accelerating its self-reliance efforts. Shanghai Yuliangsheng Technology began limited production of immersion-type DUV lithography machines in July 2024. It plans to deliver five systems by the end of the year and aims to produce around 20 units by 2027.

Major Chinese chipmakers, including Semiconductor Manufacturing International Corporation (SMIC; 00981-HK), ChangXin Memory Technologies (CXMT), and Hua Hong Semiconductor, are already listed as customers.

Analysts suggest that if the U.S. ban is not immediately implemented, the impact on China’s future access to DUV equipment may be limited. If China can secure sufficient time, it stands a chance of gradually achieving self-sufficiency in the DUV domain. However, if the ban takes effect swiftly, it will pose significant transitional challenges for Chinese chipmakers, many of which remain heavily reliant on ASML equipment in the short term.