ASML Shares Soar on New U.S. Chip Export Rule Excluding Key Allies
Shares of Dutch chip equipment manufacturer, ASML (ASML), surged in pre-market trading following the Biden administration’s announcement of a new rule on foreign chip equipment exports to China. The rule, set to be unveiled next month, will expand U.S. authority to halt exports of semiconductor manufacturing equipment from certain foreign countries to Chinese chipmakers. However, it will reportedly exempt shipments from key allies such as Japan, the Netherlands, and South Korea, effectively limiting its impact on major players like ASML.
Key Takeaways:
- ASML shares jumped over 7% in pre-market trading following the news.
- The new U.S. rule, set to be announced next month, will increase U.S. control over semiconductor equipment exports to China.
- However, the rule will exempt exports from crucial allies like Japan, the Netherlands, and South Korea, minimizing the impact on major chip equipment manufacturers.
- ASML, Nvidia Corp (NVDA), and Advanced Micro Devices, Inc. (AMD) all saw their shares rise on the news.
- The rule is an extension of the Foreign Direct Product rule, used to restrict exports to Chinese tech giant Huawei.
Expanding U.S. Control over Chip Exports
The new rule, an extension of the Foreign Direct Product rule, aims to tighten the U.S.’s grip on the global semiconductor supply chain. This rule allows the U.S. government to prevent the sale of products, even those manufactured outside the U.S., if they are made with American technology. It has been used for years to restrict the flow of chips to Chinese tech giant Huawei.
This new expansion of the rule will potentially add about 120 Chinese entities to the restricted trade list, impacting chipmaking factories, toolmakers, and related companies. This move solidifies the U.S. government’s commitment to restricting China’s access to cutting-edge semiconductor technology.
Exemptions for Key Allies
Despite the tightening of export controls, the U.S. will reportedly exempt key allies, including the Netherlands, from the rule. This exemption is crucial for companies like ASML, which heavily relies on these partnerships for sourcing vital chipmaking equipment.
The Netherlands, a leading supplier of advanced chipmaking equipment, has already imposed restrictions on ASML’s exports of immersion DUV lithography machines to China under pressure from the U.S. The U.S. had previously requested ASML to cancel scheduled shipments to Chinese customers.
Escalating U.S.-China Chip War
The new rule is part of an ongoing U.S.-China chip war, with the U.S. aiming to curb China’s advancements in semiconductor production. The U.S. has been actively pressuring its allies to restrict exports of critical chipmaking equipment to China. This includes urging Japan and the Netherlands to tighten their export controls.
The U.S., Japan, and the Netherlands signed an agreement in 2023 to prevent China from acquiring advanced chipmaking equipment that could potentially enhance its military capabilities. The U.S. has also been scrutinizing universities collaborating with ASML, particularly the Eindhoven University of Technology, due to a significant number of Chinese students enrolled there, potentially bolstering Chinese semiconductor expertise.
Mixed Reactions and Future Implications
While ASML and other major chipmakers celebrated the exemption for key allies, China criticized the U.S.’s increasingly restrictive semiconductor export regulations, claiming that these controls will negatively impact global semiconductor production and hinder technological progress.
U.S. Secretary of State Antony Blinken clarified that the U.S. export controls are not intended to hamper China’s economic or technological advancement, focusing solely on preventing the use of American technology for military purposes.
The future of the U.S.-China chip war remains unclear. The new rule, although exempting key players, still represents a significant step towards the U.S.’s goal of limiting China’s access to leading-edge semiconductor technology. The unfolding situation will likely further reshape the global semiconductor landscape, with ongoing implications for companies, governments, and geopolitical relations.
