(Bloomberg) -- ASML Holding NV Chief Executive Officer Christophe Fouquet expects pressure will grow from the US to further restrict sales of semiconductor technology to China, the biggest market for the Dutch producer of chipmaking machines.
“If you look at the geopolitical landscape, I think it’s clear that the US will continue to apply pressure on their allies for more restrictions,” Fouquet said in an interview during the Bloomberg Tech Summit in London on Tuesday. “The question is what is right for the Netherlands? What is right for Europe?”
Washington has for years sought to limit China’s rise in the semiconductor sector, through repeated rounds of export controls that have targeted the sale of advanced artificial intelligence chips and chipmaking equipment. The Dutch government has struggled to find a middle ground between its US ally and its top company’s biggest market.
Fouquet said much of ASML’s business with China is focused on mature technology that is less relevant to national security concerns. “A lot of the focus in China today is on mainstream semiconductors,” he said. “This is very different from AI.”
ASML has a monopoly on making the lithography machines that help the world’s largest semiconductor companies to produce the advanced chips that power everything from Apple Inc.’s smartphones to Nvidia Corp.’s AI accelerators. China has never been able to buy ASML’s most advanced machines, which use extreme ultraviolet, or EUV technology.
The Netherlands has also restricted ASML from selling some of its second most-advanced immersion DUV lithography systems to China and last month published new export control rules that made ASML apply for export licenses in The Hague. China relies on ASML’s systems to advance its chip-making technology, as the country has not yet been able to develop similar equipment capable of producing cutting-edge semiconductors.
Fouquet said the existing restrictions mean China is “10 to 15 years behind when it comes to advanced technology.”
China was ASML’s biggest market for the last five quarters, accounting for €2.79 billion ($3 billion) of sales in the most recent period, nearly half of ASML’s total. Fouquet said that Chinese demand had been elevated due to a backlog that dated to orders placed during the Covid-19 pandemic. ASML expects sales to the country will shrink to about 20% of total revenue next year, a level that it considers more normal.
Growth Ahead
ASML’s shares plunged last week after it cut its outlook for next year and booked less than half the orders in the third quarter than analysts expected. It also triggered a rout in the broader semiconductor industry.
Even as the boom in AI accelerators means companies like Nvidia can’t keep up with demand, other key sectors for ASML remain mired in a prolonged slump.
Intel Corp. is restructuring and has delayed planned European plants, while Samsung Electronics Co. issued an apology to investors this month for its disappointing results. Producers of automotive and industrial chips are also struggling. Last week, Fouquet warned that he expects the chip market’s long-awaited recovery “well into 2025.”
The chip industry and ASML will expand next year, Fouquet said on Tuesday. “We also expect 2026 to be a growth year but it’s too early to quantify that,” he said.
ASML shares gained as much as 3.3% on Tuesday. It’s still down more than 15% since its earnings report last Tuesday.
Migration Measures
Fouquet said European countries like the Netherlands must not restrict inbound migration if they want to remain competitive.
“We have built our company with more than 100 nationalities,” Fouquet said. “Bringing talent from everywhere has been an absolute condition for success.”
The Netherlands’ new cabinet led by far-right lawmaker Geert Wilders’ Freedom Party has vowed to implement the country’s strictest-ever migration policies. It asked the European Union to opt out of its migration agreement and vowed to stem the influx of international students, strengthen border controls and freeze decisions on asylum applications. The government has also threatened to deport people.
Access to human capital is as much a condition of success as capital, energy and a place to build plants, according to Fouquet.
“If you want to compete with other countries like China and the US, not only you need to have those conditions, but those conditions have to be as good as possible,” he said.
(Updates with details throughout.)
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