U.S. government pursues export restrictions preventing China from acquiring ASML's deep ultraviolet chipmaking equipment.

The United States government is reportedly pressing the Dutch government to block semiconductor equipment maker ASML from selling its older deep ultraviolet lithography (DUV) systems to China, according to a Tuesday report from Bloomberg citing unnamed sources. US officials are also trying to convince the Japanese government to halt sales of DUV systems from Nikon. ASML and both the US and Dutch officials declined to comment on the report.

China has pursued DUV systems because it has been unable to obtain ASML's more advanced extreme ultraviolet light (EUV) machines, which are increasingly used for leading-edge components such as Apple's M2 silicon and Nvidia's H100 datacenter GPU. ASML is the only company making EUV equipment. The Dutch government has not granted ASML a license to ship EUV systems to China after facing pressure from the United States. With ASML dominating the market for DUV systems, particularly the most advanced immersion lithography machines, US officials are seeking to cut off China's access to this older but still widely-used technology.

SMIC, China's largest chipmaker, is among the country's semiconductor manufacturers attempting to make bulk purchases of DUV systems from ASML. According to a BusinessKorea report, SMIC plans to invest $11 billion to grow its DUV capacity by 2023. While DUV systems are mainly used for older manufacturing processors with lower transistor densities like 30nm, semiconductor manufacturers can use multi-patterning techniques to make denser nodes, such as 10nm. TSMC relies on DUV for the first two generations of its 7nm nodes, though the Taiwanese foundry giant, like Intel and Samsung, are now focused on EUV for next-generation processes.

If the US succeeds in halting sales of ASML's DUV systems to China, the move could make a sizable dent in the company's revenue since chip factories in China accounted for 14.7 percent of ASML's 2021 sales, according to Bloomberg. A successful export ban would significantly curtail China's efforts to expand its semiconductor manufacturing footprint, compounding effects from previous restrictions on other advanced chipmaking equipment from American companies.

The ban would be considered a strategic win for the US, though it would more likely benefit Europe and other regions building out chipmaking capacity. This is particularly significant given that the Western power is currently struggling to approve the chip subsidies that companies like Intel are requesting.