How the latest US chip export controls exposed China’s weak link in the semiconductor supply chain

ASML will be restricted from shipping certain DUV lithography systems, including its Twinscan NXT1980Di, to China, which is the company’s third-largest market

Analysts believe the new measures, if implemented strictly, could even curtail China’s capacity expansion efforts in mature nodes as the US tries to plug loopholes

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Che Panin BeijingandAnn Caoin Shanghai

Published: 10:00am, 4 Nov 2023Updated: 11:47am, 24 Nov 2023

The US government’s stepped-up controls that target less advanced lithography systems have exposed China’s deficiency in chip-making equipment, despite recent progress towards Beijing’s overall goal of semiconductor self-sufficiency.

Citing national security concerns, the Biden administration’s latest rules, which tightened regulations issued last October, aim to undercut China’s artificial intelligence (AI) development by cutting off the country’s access to less-advanced chip-making equipment from ASML and data-centre chips from Nvidia.

In the 121-page document detailing updates to the export controls on chip-making tools, the US Bureau of Industry and Security intensified restrictions on a slew of gear needed for key processes in semiconductor wafer fabrication, including lithography, etching, deposition, implant and cleaning.

More specifically, it abolished the “de minimis” rule that applied to certain lithography systems, which sets a de facto bar higher than export rules published by the Dutch government in June. Netherlands-based ASML will be restricted from shipping certain deep ultraviolet (DUV) lithography systems, including its Twinscan NXT1980Di, to China, which is the company’s third-largest geographic market.

“If there are no available local substitutes and the 1980Di is off the table, the impact would be huge in advanced nodes as well as mature nodes,” said Drady Wang, an associate director with research firm Counterpoint.