A Take On US/China SemiConductor Trade

Having shed almost 35% in stock price over the past 3 months from recent highs, ASML are well positioned to understand the nuances of the semiconductor industry more than most. Whilst some of it's industry peers have been reporting record numbers in recent weeks, TSMC to name one, ASML's recent print underwhelmed markets and saw sentiment retreat.

Comments from ASML's CEO Christophe Fouquet help to shed a little light on expectations for international trade in the sector. Mr Fouquet revealed in a recent update that the U.S. seems set to continue its strategy of restricting the export of certain high-tech goods to China.

While ASML is not an American company, the U.S. has considerable influence over international export controls, and it has been pressuring allies and partners to adopt similar hardline stances on exports to China. The U.S. has argued that such measures are essential for national security reasons, ensuring that sensitive technology does not end up being used against it and its allies.

The statement by the CEO underscores the ongoing efforts of the U.S. administration to curb China's access to advanced technology that could potentially be used to bolster its military capabilities or to gain an economic edge. This development is significant as ASML, a Dutch company, is the leading supplier of photolithography systems essential for chip manufacturing. The company's advanced EUV (extreme ultraviolet) machines are crucial for producing the smallest and most advanced semiconductors.

These controls come amidst growing tensions between Washington and Beijing over technological supremacy, which has been identified as a critical factor in future economic and military dominance. The U.S. has moved to block the supply of chips and chip-making technology to Chinese tech giants, including Huawei, citing national security concerns and allegations of intellectual property theft.

For China, these restrictions pose a significant barrier to its ambitions to become self-reliant in semiconductor technology, an industry that's become a battleground for economic and strategic power. China has invested heavily in its chip industry but still lags behind in the most advanced sectors, which are dominated by companies like ASML, which are caught in the middle of this geopolitical tug-of-war.

As the CEO of ASML Holding indicates, the United States continues to view technological restrictions as a key lever in its competition with China. This persistent export pressure could further strain relations between the two powers and reshape the global tech landscape, impacting industries and markets worldwide. How China will respond remains to be seen, but what is clear is that the semiconductor industry lies at the heart of this escalating techno-strategic rivalry.