China's semiconductor industry could witness a potential shock, as US lawmakers are now moving towards banning the export of critical ASML equipment to the region.
US Lawmakers Are Looking To Ban the Export of ASML's DUV Technology to China, Targeting Huawei, SMIC & Many Others
China has been battling US export restrictions, particularly on the semiconductor front, for quite some time now, and the industry saw a massive downturn when the US administration imposed an indirect export ban on EUV equipment to China via the Netherlands' ASML. While this did prompt Beijing to bolster efforts to build a domestic chip supply chain, it curtailed efforts to climb up the process race, which is why "officially," China is limited to 5nm. However, according to a press release from the Foreign Relations Committee, lawmakers are preparing to pass the MATCH Act, which would ban the export of DUV equipment.
This bipartisan legislation modernizes U.S. export controls to ensure adversaries cannot buy "chokepoint" semiconductor manufacturing equipment (SME) technology from the United States or our partners that they cannot build themselves.
By promoting harmonization of export controls among allies and closing servicing and entity-specific loopholes, the MATCH Act preserves the U.S. technological lead in the AI competition with China.
- U.S. Senator Jim Risch
For those unaware about how important DUV lithography equipment currently is for China, it is the only practical option for fabs in the region. Chinese chip giants like Huawei, SMIC, and Hua Hong, along with memory manufacturers like CXMT and YMTC, are entirely dependent on DUV for their respective purposes. SMIC utilizes ASML's DUV equipment for its N+1/N+2 7nm-class processes, which they have achieved through multi-patterning. At the same time, CXMT and YMTC use DUV machines to scale memory capacity. Given how domestic chip giants have been racing to increase capacity, a potential DUV ban could significantly curtail those efforts.
The MATCH Act proposes the "sale or servicing" of DUV immersion technology and justifies it by citing that the equipment is being used to modernize China's military technology. The Act also proposes that all of the above-mentioned Chinese DUV users face restrictions similar to those under the Entity Act, which would bar them from accessing foreign markets. The MATCH Act is currently under discussion and hasn't been signed into law, but it appears US lawmakers aren't coming for a critical element of the Chinese semiconductor supply chain.
DUV procurement from Chinese suppliers was expected to increase in the coming quarters, as customers such as CXMT and YMTC were investing heavily in new production lines. However, according to the most recent ASML report on revenue from China, it accounted for almost 20% of total revenue, driven entirely by DUV lithography sales. Given that the MATCH Act has been formalized, we could see ASML face another challenge on the geopolitical front, as the Dutch chipmaker wouldn't be able to access one of the largest semiconductor markets.
China's reliance on DUV has been significant over the past few years, and while the domestic industry has made efforts to build in-house equipment, it has been confined to mature processes such as 28nm. For higher-end processes, like 7nm, fabs have been heavily dependent on ASML's technology, which is why US legislation could prove a major headache.
About the author: Muhammad Zuhair is a hardware and technology reporter for Wccftech, specializing in the semiconductor industry and the complex interplay between technology, manufacturing, and geopolitics. His coverage focuses on the corporate strategies and technological roadmaps of industry giants like TSMC, NVIDIA, Samsung, and Intel. Zuhair's expertise lies in deconstructing complex topics such as fabrication nodes (e.g., 2nm process), the economic impact of policies like the CHIPS Act, and the strategic development of AI infrastructure from NVIDIA, AMD and Intel.
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