Silicon supply chain players plot exodus from China in wake of ASML's exit

Vietnam, Malyasia, and Singapore roll out the welcome mat

The Biden Administration's efforts to starve China's domestic semiconductor industry have reached an inflection point as allied nations join the cause.

However, it's not just Chinese firms finding themselves in the crossfire. Reuters reports that officials from a dozen companies which supply ASML with components are now weighing a mass exodus from China to avoid exposure to export restrictions.

Officials from Neways, NTS Group, Bestronics, AAE, BV, BKB Precision, KMWE Group, Sempro, Sioux technologies, and VDL ETC will reportedly visit Vietnam, Malaysia, and Singapore to discuss potential expansion in those countries, according to a note from a Dutch public body obtained by Reuters.

The news comes just a day after the Dutch government revealed it would join the US in restricting the export of sensitive semiconductor manufacturing equipment to countries or organizations that pose a threat to the nation and its allies' national security. While the measures didn't name ASML or China directly, it's obvious that the Dutch company's presence in the Middle Kingdom will be affected.

ASML is a leading supplier of lithography equipment used to etch microscopic features into silicon wafers. While the company's most advanced extreme ultraviolet (EUV) machines have never been sold to China, the company has supplied the Middle Kingdom with a steady supply of older deep ultraviolet (DUV) lithography machines.

Under the USA's export controls, ASML is required to obtain special licenses before selling DUV equipment to China. That licensing requirement could either mean an effective ban on the sale of DUV equipment to China, or a simply a delay to the availability of such machines in the nation.

The USA's position also has implications for the companies supplying parts to ASML's machines, which are incredibly complex and rely on a variety of components sourced from around the world, including China. That puts ASML's suppliers at risk of being used as a pawn in the US-China trade spat.

Japan procrastinates on trade bans

While The Netherlands has pushed ahead with trade restrictions mirroring those imposed by the US, Japanese officials are taking their time.

The nation was expected to announce similar restrictions on the sale of semiconductor manufacturing equipment, software, and materials last week. However, Bloomberg last Friday cited the Japanese trade minister as saying a final decision has not been taken.

The wording of The Netherland's trade policy appears to have given Japanese leaders pause. "We will consider appropriate measures in light of developments in the Netherlands," Trade Minister Yasutoshi Nishimura said during a press conference, according to Bloomberg. "Our understanding is that the Dutch announcement does not target a specific country."

To be fair, US trade policy doesn't bar the export of semiconductors and related goods to China. Instead, the US has taken the stance of barring sales to government organizations, companies and persons who pose a threat to the nation's national security interests.

Japan's hesitance in establishing its own export controls on semiconductor manufacturing equipment and materials is not an unpleasant surprise to the USA - Japanese leaders last month signaled the country would likely take a less aggressive approach than the US or The Netherlands. ®

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