(Bloomberg) -- ASML Holding NV’s top executive brushed off concerns about tensions between the U.S. and China, a market that’s growing in importance to the Dutch chip gear-maker.
“Someone needs to make those chips and to make those chips you would need EUV, and there is basically only one place where they can get it,” Chief Executive Officer Peter Wennink said in an interview with Bloomberg Radio, referring to its advanced lithography equipment. “For our total business it doesn’t really matter.“
ASML, which has a monopoly on advanced lithography equipment needed to make next-generation chips, is already a crucial supplier to Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. but hopes to drive deeper into China. Beijing wants to build a world-class homegrown chip industry to wean itself off foreign imports -- an effort that would need ASML’s one-of-a-kind machines. Yet it’s faced difficulty getting the Dutch government to renew a license to export to China amid ongoing trade tensions.
ASML shares rose 0.2% at 1:14 p.m. in Amsterdam trading.
“It’s up to the Dutch government to determine whether there is a national security risk and of course there are views in the U.S. and China whether that’s a risk,” Wennink said, adding that the company has responded to requests for information from the Dutch government.
Asked whether he was optimistic about obtaining the license, Wennink said “the Dutch government takes very due care when it concerns the facts and the circumstances.”
Read more: China Stockpiles U.S. Chips as ‘Silicon Curtain’ Descends
China relies on imported chip manufacturing equipment for its audacious ambition of creating a self-reliant semiconductor industry, which supplies key components for a wide spectrum of electronics from smartphones to satellites. ASML is an essential link in that plan, which will drive Chinese purchases of more than $30 billion of semiconductor equipment between 2020 and 2021, according to industry organization SEMI. China’s Ministry of Foreign Affairs said in a statement last week the Netherlands should make an objective decision on ASML’s exports based on its own interests.
European businesses have been caught in the middle of trade tensions between the U.S. and China, even as Washington and Beijing last week sealed the first phase of a trade deal. But the U.S. still maintains tariffs on roughly two-thirds of imports from China and both sides still need to negotiate the pact’s second phase, with discussions expected to be difficult.U.S. officials have urged allies to scrutinize business ties with Beijing, invoking concerns around national security and espionage. The White House, concerned about China’s ambitions to dominate a swath of technology from AI to semiconductors, has sought ways to contain the country’s rise. China, meanwhile, has threatened European countries with retaliation on trade if its companies are shunned.European telecom operators are among those squeezed between the two major world powers after Washington called on European governments to exclude Huawei Technologies Co.’s equipment from the build-out of their 5G networks.
The Dutch government has held back on renewing the license ASML needs to export its extreme ultraviolet lithography machines under pressure from U.S. officials, Reuters reported this month. That equipment is key to any chipmaker that wants to fabricate next-generation chips, say of 7 nanometer or lower nodes.Last week, U.S. ambassador to the Netherlands Pete Hoekstra told Dutch newspaper Het Financieele Dagblad that ASML’s technology “doesn’t belong in certain places,” suggesting China. The Chinese ambassador, Xu Hong, had warned days earlier in the same paper that the relationship between the Netherlands and China was at risk if the government blocks EUV machine exports.For its part, the Netherlands says it will take its own decision on the matter, independent of foreign influence. “They are free to express their view and we take note of that, but it is not decisive,” Dutch Prime Minister Mark Rutte said of the U.S. and Chinese ambassadors’ comments last week.
ASML’s EUV technology has both civilian and military applications and therefore is subject to EU dual-use licensing obligations under the Wassenaar Arrangement, according to the Dutch Foreign Ministry.
Wennink said at a press conference the Dutch government had asked the company questions about the EUV technology, how it works, and who the customer is. The level of detail the government is seeking “is probably more than they would normally do,” he said.
The delay in getting the EUV license has “zero” impact on the company’s business, he said. The licensing issue concerns their first-ever EUV order from a customer in China, where few companies are at the stage of ordering the cutting-edge technology. ASML mostly ships the machines, which cost roughly 150 million euros, to the U.S., Korea and Taiwan.
The company forecast first-quarter sales largely in line with analyst expectations and said it won orders for nine more of its EUV lithography machines in the last quarter. The Dutch company said it expects sales of 3.1 billion euros ($3.4 billion) to 3.3 billion euros for the first quarter, compared with an average estimate of 3.26 billion euros.
ASML also announced a share buy-back program of as much as 6 billion euros over three years, as it said it expects to win 4.5 billion euros in EUV revenue this year.
(Updates with CEO comments from the 15th paragraph)
--With assistance from Joost Akkermans and Gao Yuan.
To contact the reporters on this story: Ellen Proper in Amsterdam at email@example.com;Natalia Drozdiak in Brussels at firstname.lastname@example.org
To contact the editors responsible for this story: Edwin Chan at email@example.com, Amy Thomson
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