Dutch Exports To China To Comply With U.S. Demands

(CTN News) – It’s a diplomatic and business headache for the Dutch government, but it seems it’ll keep aligning with Washington on export restrictions despite U.S. demands.

The government of Prime Minister Mark Rutte is reluctant to make a blanket decision, but its public statements and national security interests suggest it’ll be slow to approve Chinese maintenance requests in the future.

If ASML gear isn’t maintained, it will break down over time, which could be a setback for China’s chip industry. It could also complicate Rutte’s efforts to stop ASML Holdings NV, the Netherlands’ biggest company, from going abroad.

Especially the Dutch’s support for Ukraine in its war against Russia is an emerging factor. Xi Jinping and Rutte, who’s gonna be NATO’s next secretary general, talked about ASML last week in Beijing. As the Netherlands arms Ukraine with F-16s, Chinese support for Russia poses a big problem. The Netherlands and Europe are at immediate risk if Russia wins in Ukraine, says Rutte.

AsML’s Chinese customers might not get licenses from his government. China was warned about “decoupling and breaking links” by Xi.

POINT OF DEPARTURE

Beijing says it’s neutral in the Ukraine conflict, but Xi’s allies Putin. 198 Dutch citizens were killed when Malaysia Flight 17 (MH17) was downed over eastern Ukraine in 2014. Putin is also wanted by the Hague-based International Criminal Court for war crimes. Rutte called on China to do more to prevent Russia from getting “dual-use goods” such as ASML’s machines and chips.

His comments don’t mean a presumptive denial for Chinese customers seeking ASML gear that falls under licensing rules, but they show where the Dutch government is likely to start. ASML wouldn’t comment. As far as export regulations go, it’s compliant. The Netherlands should determine export policy with larger allies, says EU lawmaker Bart Groothuis.

It’s much better for us to do that, regulate ASML, with the U.S., or maybe Europe in the future, and I’d say that’s the right move,” he said.

Alan Estevez, president Joe Biden’s export policy chief, is meeting with Dutch government officials and ASML executives on Monday.

A Trump win might weaken U.S. support for Dutch security priorities, including Ukraine, so the government needs to weigh its response.

CAS BY CAS

The U.S. will probably also have less leverage over technology transfers to China if the U.S. role in NATO decreases, said Frans-Paul van der Putten of the Clingendael Institute. China, he said, is “the only country with at least some kind of influence on Russia”.

It says it will judge Chinese licensing requests like it does others: on a case-by-case basis, weighing the risk they’ll be used for military purposes. With Xi’s civil-military fusion policies, Dutch officials will have a tough time figuring that out from afar.

Fortunately, ASML’s revenue is about 20% maintenance, and China is its third-biggest market after Taiwan and South Korea. It’s sold chipmakers in China $10 billion in equipment over the last three years, most of it exempt from export restrictions. SK Hynix and TSMC have also set up factories in China with Western owners.

Chinese chipmakers could be hurt if their licenses are denied, since ASML machines are crucial for making chips. Despite U.S.-led sanctions, chipmakers have shown surprising resilience so far and will continue to find ways around them.

The manufacturer will be fighting a rearguard action to keep those machines going as long as possible if servicing is cut off, said Paul Triolo, a U.S. expert on Chinese semiconductors.

SEE ALSO:

Apple Watch Import Ban Reversed By US Appeals Court