US may pressure EU to tighten China export controls, ASML warns

US-China tech tensions intensify: The CEO of Dutch semiconductor equipment manufacturer ASML anticipates increased US pressure on the EU to further restrict technology exports to China, highlighting escalating geopolitical tensions in the global AI race.

• ASML CEO Cristophe Fouquet expressed his expectation of continued US pressure on allies for more restrictions during the Bloomberg Tech Summit.
• The company, a leading producer of lithography machines crucial for advanced chip manufacturing, has already faced export restrictions to China at Washington’s insistence.
• The Netherlands banned ASML from selling its most advanced machines to China last year, with the US subsequently extending the ban to older equipment as well.

European response and positioning: The EU is striving to navigate a delicate balance between maintaining economic ties with China and addressing US security concerns, while also protecting its technological interests.

• European Commission President Ursula von der Leyen has emphasized the EU’s desire to avoid a protectionist approach and resist joining the US “on one side of the barricades.”
• The EU has imposed significant levies on certain Chinese imports, such as electric vehicles, but aims to maintain fair competition and trade relations with China.
• Brussels is seeking to differentiate its approach from the US, focusing on targeted measures rather than blanket restrictions.

Implications for the semiconductor industry: The ongoing geopolitical tensions are reshaping the global semiconductor landscape, with potential consequences for companies like ASML and the broader tech industry.

• ASML’s lithography machines are critical for producing advanced chips used in various technologies, including Apple’s iPhone and Nvidia’s AI accelerators.
• The restrictions on sales to China could impact ASML’s revenue, but new opportunities may arise as countries seek to develop domestic chip manufacturing capabilities.
• The shift away from reliance on Chinese technology could lead to increased demand for European tech, potentially offsetting losses in the Chinese market.

US political landscape and future policies: The tech trade war with China is likely to continue regardless of the outcome of the upcoming US presidential election, with both major candidates advocating for stricter measures.

• Republican contender Donald Trump has promised a hawkish approach, proposing 60% duties on all Chinese imports.
• Democrat Kamala Harris is expected to pursue more targeted and controlled policies, but still maintaining a tough stance on Chinese technology.
• A former Biden administration national security official noted the opening of a new front in the US-China tech cold war, focusing on data, software, and connected devices.

EU’s strategic challenges: To effectively navigate the complex geopolitical landscape and resist US pressure when necessary, the EU faces several key challenges.

• The bloc needs to develop better intelligence capabilities to assess China’s technological advancements independently, rather than relying solely on US-provided information.
• Harmonizing foreign policy stances among EU member states is crucial for a coherent approach to Chinese technology.
• Pooling resources and information across the EU will be essential for implementing effective and consistent export control measures.

Analyzing deeper: The ongoing tech tensions between the US, EU, and China underscore the complex interplay between national security concerns, economic interests, and technological innovation in the global AI race. As the situation evolves, the EU’s ability to chart an independent course while balancing relations with both the US and China will be crucial in shaping the future of the global tech industry and international trade dynamics. The outcome of these tensions could have far-reaching implications for technological development, economic competitiveness, and geopolitical alignments in the coming years.