ASML Boss Warns Of Chip Supply Uncertainty

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Beijing will develop its own semiconductor equipment says CEO of ASML, and says market access to China is “absolutely essential”

The head of the largest supplier of chipmaking equipment, ASML Holding, has cautioned about trade restrictions with China, as well as countries implementing their own chip subsidies.

ASML’s CEO Peter Wennink was also quoted by Reuters as saying that subsidies such as the US Chips Act or the EU Chips Act will lead to new manufacturing capacity that isn’t utilised at first, creating more supply gluts and shortages.

After years of chip shortages during the Covid-19 pandemic, the tech sector is currently facing an oversupply of semiconductors, as global PC shipments continue to decline by as much as 30 percent.

ASML's TWINSCAN NXE:3400B semiconductor lithography tool. ASML chip
ASML’s TWINSCAN NXE:3400B semiconductor lithography tool. Image credit: ASML

China controls

ASML’s Peter Wennink made the comments on Wednesday, after ASML last week posted strong first quarter earnings.

Last week he said China sales would increase as Chinese chipmakers rush to buy older tools that do not fall under US-led restrictions that the Dutch government said it would adopt in March.

Those restrictions also include Japan, and involves the only three countries that are home to manufacturers of advanced machines to print microchips.

The Biden administration is seeking to slow Beijing’s technological and military advances by hobbling its semiconductor industry.

ASML dominates the market for lithography tools dominates the market for lithography systems used to create chips’ minute circuitry.

It is also Europe’s biggest tech firm (by market capitalisation) and is based in Veldhoven. It has previously sold more than €8bn (£7.1bn) of advanced machinery used to make semiconductors to Chinese customers since 2014.

Earlier this month China urged the World Trade Organisation (WTO) to scrutinise the US-led technology export restrictions on advanced semiconductor technology.

Market access

And according to Reuters, Peter Wennink at ASML’s annual meeting on Wednesday said it was “logical” that China would seek to develop its own semiconductor equipment when it is restricted from purchasing tech products made abroad.

Wennink reportedly said that he was not worried about rivals in Japan, the US or China being close to building cutting edge commercial lithography products.

“But it can happen of course, so it is absolutely essential that we get to keep having market access to China”, which is the largest market for computer chips globally, he was quoted as saying. “Market access is as important to us as it is to our Chinese customers,” he said.

The ASML CEO said policies such as subsidies in the US, China and Europe will lead to new manufacturing capacity that isn’t utilised at first, leading to more gluts and shortages, such as the Covid-19 pandemic shortages and the current oversupply.

But Wennink reportedly said the global chip market will still double to $1.0 trillion-$1.2 trillion by the end of the decade.

Wennink cited one unnamed carmaker in mainland China, which is ASML’s third market after Taiwan and South Korea.

That Chinese carmaker reportedly plans to make so many electric vehicles in the next three years that it would require “six or seven full-fledged logic semicondcutor factories” that haven’t yet been built.