Europe Halts US Chip War: Restrictions on ASML

What happened?

The United States government, under the Biden administration, has proposed the MATCH Act (Monopsony Act Targeting Chinese High-tech), a law that would ban the export to China of deep ultraviolet (DUV) immersion lithography equipment manufactured by Dutch company ASML. These machines, though from a previous generation (about a decade old), are essential for producing 28nm and larger chips used in automotive, consumer electronics, and industrial applications. According to statements by ASML CEO Christophe Fouquet to TechCrunch in May 2025, what China can currently buy are older-generation DUV tools, the same equipment the MATCH Act would put off-limits.

The European Union, led by the Netherlands and Germany, has responded with a joint statement warning that this unilateral measure undermines European strategic autonomy and threatens the viability of its semiconductor industry. Brussels has initiated formal consultations with Washington to seek a negotiated solution, while preparing possible countermeasures, such as restrictions on exports of rare earths or European chip manufacturing equipment to the United States. This move comes amid an intensifying technological war between the US and China, with precedents like the restrictions on Huawei in 2019 and the US CHIPS Act of 2022.

Why is it important?

This conflict marks a turning point in the technological war between the US and China. Until now, Washington had managed to impose restrictions on the sale of EUV (extreme ultraviolet) lithography equipment to China, but DUV machines represent a much larger and more lucrative market for ASML. In 2025, ASML sold 42 DUV systems to China, generating approximately €3.2 billion, 15% of its total revenue. A total ban could cost ASML up to €1.5 billion annually in lost sales. Moreover, DUV equipment is critical for manufacturing 28nm and larger chips used in cars, appliances, and IoT devices, sectors where China is a key player.

The MATCH Act not only affects ASML but also European chipmakers like Infineon and STMicroelectronics, which depend on the Chinese supply chain. Infineon, for instance, derives 25% of its revenue from China, and a disruption could impact its operations. The measure could also accelerate China's efforts to develop its own lithography industry, such as the SMEE (Shanghai Micro Electronics Equipment) project, which has already made progress on 90nm DUV machines, though experts estimate China is still 5-7 years away from producing competitive 28nm equipment.

Historically, export restrictions on technology to China have had mixed effects. For example, sanctions on Huawei in 2019 spurred China to invest heavily in semiconductors but also caused disruptions in global supply chains. In this case, the EU fears that unilateral US action could further fragment the market and weaken the transatlantic alliance.

What consequences will it have?

1. For ASML: Loss of a key market and possible need to relocate part of its production outside Europe to circumvent restrictions. Bernstein analysts estimate a total ban would reduce ASML's profits by 10-15% annually. Additionally, the company could face tensions with its workforce and the Dutch government.
2. For the EU: Reinforcement of strategic autonomy, with investments in local chip manufacturing (European Chips Act, which plans €43 billion by 2030) and possible trade retaliation. The EU could tax US digital services or restrict exports of European chip-making equipment, such as those from ASML or German company Süss MicroTec.
3. For China: Acceleration of its own technological development, albeit at higher cost and with years of delays. China has already doubled its semiconductor R&D investment in 2024, reaching $50 billion, but still relies on ASML for 80% of its lithography equipment. Projects like SMEE could see a boost, but the technology gap remains wide.
4. For the US: Risk of fracturing the technology alliance with Europe, weakening the common front against China. If the EU retaliates, it could affect US companies like Applied Materials or Lam Research, which also sell equipment to China. Moreover, the measure could be seen as a violation of WTO rules, leading to legal disputes.

What should readers know?

This confrontation is not just a trade dispute but a clash of visions on how to manage national security and technological globalization. Europe argues that restrictions should be multilateral and proportionate, while the US prioritizes containing China at any cost. Investors should closely monitor negotiations, as an escalation could affect the entire semiconductor value chain, including chipmakers like TSMC and Samsung, which depend on ASML equipment. For tech companies, diversifying suppliers and increasing supply chain resilience is more urgent than ever, especially in sectors like automotive and consumer electronics.

A relevant fact is that, according to TechCrunch, the DUV machines China can currently buy are the same ones the MATCH Act would ban, but existing contracts might be exempt. However, regulatory uncertainty is already affecting investment decisions. For example, SMIC, China's largest chipmaker, has delayed its 28nm capacity expansion plans pending clarity. In summary, the MATCH Act could be a point of no return in the technological war, with implications beyond semiconductors affecting global geopolitics.