tech war: dutch chip manufacturing tool maker asml still aims to expand china workforce, despite tighter us export restrictions

ASML Holding, which has a global monopoly in the supply of extreme ultraviolet (EUV) lithography systems used to make advanced semiconductors, is on a trajectory to further expand its workforce in China, where its employee headcount has tripled over the past five years, according to the Dutch firm’s top executive on the mainland.

Shen Bo, ASML senior vice-president and country manager for China, confirmed on Tuesday that the company has grown the number of its local personnel to more than 1,500 as of the end of August, up from less than 500 in 2017, on the back of rapid business growth on the mainland, a development that was first reported last week by Chinese media Jiemian News.

ASML, which established its China operations in 2000, currently owns 12 office buildings in the country, where it is expected this year to hire more than 200 new employees, or 14 per cent of its local workforce, according to a Bloomberg report in June, despite rising tensions between Beijing and Washington.

While Shen did not address that complex geopolitical situation in his interview with Jiemian, ASML has seen early signs of revenue being switched from mainland China to other markets because of US government pressure on the firm to broaden an existing moratorium on sales of advanced chip-making systems to the country.

tech war: dutch chip manufacturing tool maker asml still aims to expand china workforce, despite tighter us export restrictions

Employees are seen working on the final assembly of ASML’s Twinscan NXE:3400B advanced semiconductor lithography machine, with its panels removed, in Veldhoven, the Netherlands, on April 4, 2019. Photo: Reuters

Mainland China’s share of ASML’s total sales of lithographic systems by value dropped to 10 per cent in the second quarter, down from 34 per cent in the first quarter, when the country was the Dutch firm’s largest single market.

Its major domestic customer is Semiconductor Manufacturing International Corp (SMIC), the mainland’s largest contract chip maker, which was added to the US trade blacklist in December 2020.

By comparison, ASML shipments to Taiwan made up 41 per cent of its total sales in the June quarter, while South Korea accounted for 33 per cent.

At present, ASML is not selling its EUV lithography systems to China, which has made it impossible for the country’s major chip foundries to manufacture cutting-edge integrated circuits, such as those used in the latest 5G smartphones.

The company continues to sell its older deep ultraviolet (DUV) lithography systems to China.

These are capable of producing less-advanced chips for certain cars, computers and mobile phones. Still, the US has been lobbying the Netherlands to ban ASML from selling some of these older systems to the world’s second-largest economy.

While ASML’s personnel expansion in China may appear to be at risk because of potential new US restrictions, the company continues to acknowledge the country’s important position in the global semiconductor market.

“I think we need to realise that China is an important player in the semiconductor industry and especially in the more mature [chip manufacturing] nodes,” ASML president and chief executive Peter Wennink said during the firm’s second-quarter earnings conference call in July.

Commenting on US pressure to further restrict ASML equipment sales to mainland China, Wennink described it as “a political position which we have to wait for politicians to come up with”.

Washington, meanwhile, is considering new regulations next month that would place further export restrictions on chips used for artificial intelligence (AI) computing and on chip-making tools, according to a Reuters report on Monday.

That would follow the US government’s ban on Nvidia Corp and Advanced Micro Devices from selling chips used for AI and high-performance computing work to China.

tech war: dutch chip manufacturing tool maker asml still aims to expand china workforce, despite tighter us export restrictions

Peter Wennink, the president and chief executive at ASML Holding. Photo: Facebook

In August, new export controls on technologies for the production of advanced chips were rolled out by the US.

That came several days after US President Joe Biden signed into law the Chips and Science Act, which provides nearly US$53 billion in semiconductor production incentives on American soil.

China’s semiconductor industry, however, has recently made some progress, according to a report from a Canada-based tech research firm.

In July, analysts at TechInsights doubled down on their earlier report that concluded SMIC has made a key technological breakthrough, putting it on a par with industry giants. SMIC can produce 7-nanometre chips with existing DUV systems, the report said.

Keyword: Tech war: Dutch chip manufacturing tool maker ASML still aims to expand China workforce, despite tighter US export restrictions

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