Dutch export restrictions to result in China 'chip issue'

22 March 2023

The Dutch government has implemented export controls on semiconductors, which will impact Chinese chip manufacturing and lead to increased costs, experts have warned.

Export controls introduced by the Dutch government will restrict the country’s semiconductor technologies being exported for use in military systems and weapons of mass destruction, and to “prevent unwanted long-term strategic dependencies”.

Dutch foreign trade minister Liesje Schreinemacher wrote in a letter to lawmakers the export restrictions were “necessary for national and international security to expand the existing export control of specific semiconductor production equipment”, given the “geopolitical context”.

SAP Business Network SVP and chief marketing and solutions officer, Tony Harris, told Supply Management the restrictions will hit Chinese chip manufacturers and result in a “microchip issue”, as they rely on Dutch technologies in their processes.

Harris said: “China is going to have a microchip issue, which we could see start to have an impact once again on the supply of certain consumer electronic devices, on anything that contains a microchip.

“Ultimately, this is going to have an impact all the way throughout the supply chain. In turn, it’s likely to have an effect on price. We are still seeing price increases across a whole range of commodities – this legislation is only going to continue to compel that.”

The move follows restrictions imposed by the US on chip makers in China, barring firms that receive federal funding in the US from expanding in “foreign countries of concern”, including China and Russia. 

ASML, a Dutch company and the world’s largest supplier to the semiconductor industry, said the legislation means the firm will need to apply for export licences for shipment of its most advanced technologies, although “it will take time for these controls to be translated into legislation and take effect”.

The company added it had not yet received clarity around which technologies the Dutch government has planned to restrict.

The legislation comes amid China's efforts to support its most successful chip companies with greater funding and control over government research, as tightening global restrictions on advanced technology forces the country to seek a new approach to its chip production, reported the Financial Times on Tuesday.

Select companies will have access to additional government funding without having to achieve performance goals, and will play a bigger role in research projects, reducing the influence of state companies and academic institutes. 

Taipei-based Isaiah Research vice-president Lucy Chen told the FT: “There are bound to be bouts of pain in replacing equipment with domestic alternatives, but it is unavoidable.”

The European Union’s Critical Raw Materials Act, published last week, also mandates companies diversify sources of materials critical to new technologies away from countries that control significant volumes of supply.

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