China threatens retaliation in chip war against Dutch and Japanese

Pressure mounts as Dutch PM may not renew ASML’s China licenses

Chinese state media and officials have threatened retaliation against the Netherlands and Japan, urging those countries not to accede to Washington’s demands to tighten controls on chip exports to China. Global Timesa spokesperson for the Chinese Communist Party, said that if the Dutch government follows US orders to stop maintenance services for state-of-the-art deep ultraviolet (DUV) lithography machines, Beijing will take corresponding measures, such as “imposing trade restrictions or seeking alternative suppliers, as well as reassessing its cooperation with the Netherlands in global areas.”

These comments come after the Bloomberg report on August 29 that Dutch Prime Minister Dick Schoof is unlikely to renew certain ASML licenses for maintenance and parts supply in China when they expire at the end of this year, under pressure from the United States.

The Biden administration has been considering enforcing the Foreign Direct Product Rule (FDPR), which bars other countries from exporting products containing U.S.-origin technology to China. Schoof said talks with the U.S. are ongoing but emphasized the importance of ASML’s economic interests.

The Netherlands is not the only country feeling the pressure. Chinese officials have reportedly warned Japanese companies that Beijing would retaliate if Japan tightens export controls on chips. Toyota Motor Corp executives have expressed concern that China could restrict Japan’s access to minerals essential for auto production.

Since January this year, the Dutch government has stopped issuing licenses for the sale of ASML’s most advanced DUV lithography systems to China. However, Chinese chipmakers can still purchase these machines from third parties, while ASML must continue to provide maintenance services and parts.

Chinese media have said the restrictions will have a significant impact on China’s chip industry, as the affected machines are crucial for manufacturing 7-nanometer chips. Experts warn that without ASML’s services, some of these machines could stop working as early as next year, which would result in losses for both the Chinese industry and ASML.

O Global Times He also commented that this move by Washington will intensify geopolitical instability, deepening friction in China-US and China-Netherlands relations.