Explainer: The Netherlands join the microchips war against China
Today the Netherlands dealt a significant blow to China, restricting sales of machines used to make chips. From September, Dutch companies making machines that produce advanced processor chips will need an export licence to sell their products overseas.
The Dutch government has been at pains to specify this policy is “country neutral”, but it’s clear to everyone’s eyes that instead it is part of an American-led push to isolate China in the chips market.
In fact Mark Rutte, the Dutch prime minister, met with US President Joe Biden in January, and they discussed this issue following the export controls imposed by the US on China in October of last year.
Back then, the US said China could use its chips to commit human rights abuses and make weapons, and therefore that it was dangerous to sell US-made advanced chips.
Rutte and Biden reportedly spoke about ASML, the biggest Dutch company producing chip-making machines and the only one in the world using a specific technology called “extreme ultraviolet lithography”. Today ASML’s shares were down 3.6 per cent.
The US started a chips war against China last year, and tried to bring its allies along, lamenting the fact that chips manufactured at home or in Europe could be used by China’s Communist Party for military and intelligence gains.
Predictably, the Chinese have been ready for retaliation. After the US restricted Beijing’s access to advanced chips last October, this January China accused Biden of abusing export controls. It said Washington’s strategy on chips was instead a completely political move to “maintain its hegemony”.
In May, Beijing went further blocking Chinese companies from buying products from Micron Technology, a US chips manufacturer.
China has bet big on its microchips industry. It has invested billions to develop an industry that could compete with other major players like the US, but now risks lagging behind as Washington and its allies attempt to exclude it from the international market. Despite having its own companies, China still needs foreign manufacturing equipment.
It’s hard to predict how this war on chips will develop, but what’s clear is that it is playing a big part in worsening the already tense relationship between the US and China. Events this year, like the row over the flying spy balloon looming over US territories, have put further strain on the relationship.
Biden calling Xi Jinping a dictator last week also didn’t help ease the tension.