US-China chip wars 'mainly ideological' says ex-ASML boss

And it'll be decades before things settle down again

Former ASML boss Peter Wennink says the US-China "chip wars" are mainly ideological in nature, and is warning it will likely take decades for the dispute to play out.

The Dutch chipmaking equipment biz has been caught in the crossfire of Washington's battle to curb China's technology advances, finding itself under ever increasing restrictions regarding what it can sell into the country and even how it conducts business.

Wennink, who retired in April after 25 years with the company, made the remarks during an interview with Netherlands-based radio station BNR last weekend.

He said the clashes between the US and Beijing over computer chips are mainly ideological and not based on substance and practice. This has had an impact on ASML's business, he told the station, with Washington increasingly putting the squeeze on the company's exports to China, which represents its largest market after Taiwan.

We asked ASML for comment, and it pointed us to an interview (auf Deutsch) with its latest CEO, Christophe Fouquet, published in business daily Handelsblatt. Fouquet told the paper that China is 10 years behind in semiconductors, implying this ought to reassure western nations, yet he noted lower-end chips being produced there are still urgently needed in the West.

Fouquet told Handelsblatt: "It makes no sense to stop someone from producing something that you need."

Since 2018, ASML has faced restrictions on the sale of its photolithography equipment used in the manufacture of semiconductors. These are imposed by the Dutch government, but largely at the behest of the US, which cites security concerns – that advanced technology might be used by China's military – as the reason.

Initially, the company was blocked from supplying extreme ultraviolet (EUV) gear, used for making the most advanced chips, but this was later extended to cover some of its older deep ultraviolet (DUV) tech products, and Washington has this year insisted that ASML refrain from honoring maintenance contracts with Chinese chipmaking companies, under which it services the kit.

Despite the restrictions, ASML grew 30 percent during 2023, with net sales of €27.6 billion ($30 billion), and 2024 predicted to be much in line with this figure.

Wennink indicated he has spent a significant amount of time lobbying to prevent export restrictions from becoming too strict, and tried to strike a balance.

"As a CEO you are primarily a stakeholder manager and you manage the balanced interests of your customers, your own people, suppliers, shareholders, and society," he said.

The former ASML exec acknowledged this approach may not have been appreciated in the US corridors of power. "They may have thought in Washington that I am a friend of China, but I am a friend of my customers, suppliers, and shareholders."

However, he is also not blind to the behavior of many Chinese companies, which have scant regard for patents or copyright, saying he had complained to high-ranking Chinese politicians when he believed the company's intellectual property was at stake.

Wennink is fearful the dispute between the US and China might last for decades before things calm down again. "This won't happen overnight, it will take some time," he told BNR.

It wouldn't be the first time that US trade restrictions on technology have had questionable motives. Back in the 1980s, the enemy was Japan, when its local DRAM manufacturers started to overtake those of the US, which filed anti-dumping lawsuits in response.

The US government got involved and forced an agreement with Tokyo [PDF], one of the conditions being that Japan had to cede 20 percent of its domestic semiconductor market to foreign companies.

Fouquet, meanwhile, told Handelsblatt he is certain that China, despite the billions it is pumping into the chip industry, cannot copy the crucial EUV technology that only ASML produces. He told the paper (translated from German): "EUV technology is highly complex. Bringing it together as a system is extremely difficult. We have enormous knowledge and the entire ecosystem is based here."

Meanwhile, it seems that trade with China is so valuable that German companies are snubbing calls from the US to cut the country out of its semiconductor supply chains.

Fouquet said: "Demand for these components is increasing dramatically. But producing them is not particularly lucrative. That is why very little has been invested in such factories in the West. Europe cannot even cover half of its own needs. So we need it from elsewhere - and the factories for this are currently being built in China."

According to research from the University of Sussex, German carmakers are so dependent on Chinese markets and suppliers that Germany is unwilling to decouple from China.

"Once you see how deeply German automotive and semiconductor interests are wedded together it makes sense. They're stuck in the middle, vulnerable to US powers on tech, and China on cars. For now, it looks like they're sticking with the latter," said Dr Steven Rolf, Research Fellow at the University of Sussex Business School.

German chipmakers are no more dependent on Chinese markets than those in Japan or South Korea, Rolf said, yet those countries have largely supported American efforts. It is due to "secondary exposure," through links to other important industries such as car companies, that has led them to resist pressure from the US, he claimed. ®

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