Trump administration pressed Dutch hard to cancel China chip-equipment sale: sources

    WASHINGTON/AMSTERDAM/SAN FRANCISCO (Reuters) – The Trump administration mounted an intensive marketing campaign to dam the sale of Dutch chip manufacturing know-how to China, with Secretary of State Mike Pompeo lobbying the Netherlands authorities and White House officers sharing a categorised intelligence report with the nation’s Prime Minister, folks conversant in the trouble instructed Reuters. FILE PHOTO: Employees are seen engaged on the ultimate meeting of ASML’s TWINSCAN NXE:3400B semiconductor lithography device with its panels eliminated, in Veldhoven, Netherlands, on this image taken April 4, 2019. Bart van Overbeeke Fotografie/ASML/Handout through REUTERS The high-level push, which has not beforehand been reported, demonstrates the significance the White House locations on stopping China from getting maintain of a machine required to make the world’s quickest microprocessors. It additionally reveals the challenges dealing with the U.S. authorities’s largely unilateral efforts to stem the move of superior know-how to China. The U.S. marketing campaign started in 2018, after the Dutch authorities gave semiconductor tools firm ASML, the worldwide chief in a important chip-making course of referred to as lithography, a license to promote its most superior machine to a Chinese buyer, two sources conversant in the matter instructed Reuters. Over the next months, U.S officers examined whether or not they may block the sale outright and held not less than 4 rounds of talks with Dutch officers, three sources instructed Reuters. The effort culminated within the White House on July 18 when Deputy National Security Advisor Charles Kupperman raised the problem with Dutch officers throughout the go to of Netherlands Prime Minister Mark Rutte, who was given an intelligence report on the potential repercussions of China buying ASML’s know-how, in response to a former U.S. authorities official conversant in the matter. The stress seems to have labored. Shortly after the White House go to, the Dutch authorities determined to not renew ASML’s export license, and the $150 million machine has not been shipped. Ilse van Oevering, a spokeswoman for Rutte’s workplace, declined remark, saying the federal government can’t focus on particular person licensing circumstances. The White House declined to remark. Kupperman didn’t reply to a request for remark. The delayed cargo was first reported on Nov. 6 by the Nikkei Asian Review, however particulars of the U.S. stress marketing campaign haven’t beforehand been disclosed. ASML mentioned it’s nonetheless awaiting approval of a brand new license request and declined additional remark. ASML has by no means publicly disclosed the id of the Chinese buyer, however Nikkei and others have reported that it’s Semiconductor Manufacturing International Corp (SMIC), China’s largest chip-making specialist. SMIC didn’t reply to a request for a remark. SECURITY INTEREST The ASML machine makes use of excessive ultraviolet (EUV) mild beams, generated by lasers and targeted by big mirrors, to put out terribly slim circuits on slabs of silicon referred to as wafers. That in flip makes it potential to create sooner and extra highly effective microprocessors, reminiscence chips and different superior parts, that are important for client electronics and navy functions alike. Only a couple of corporations, together with America’s Intel Corp, South Korea’s Samsung Electronics and Taiwan’s TSMC, are at the moment able to manufacturing essentially the most refined chips. But China has made catching as much as these corporations in chip-making know-how a key nationwide precedence and is investing tens of billions of {dollars} within the effort. That drive has run head-on into the Trump administration’s efforts to dam the move of delicate know-how to China on nationwide safety grounds. Companies promoting U.S.-made items are actually barred from transport them to blacklisted Chinese companies together with telecoms big Huawei Technologies [HWT.UL] and surveillance vendor Hikvision with no particular license. The U.S. authorities can even deny licenses to companies that wish to promote items made with U.S. know-how to any Chinese firm, not simply these on the export blacklist. But blocking corporations like ASML that manufacture abroad is far more troublesome. Under present laws, the U.S. can require a license for a lot of high-tech merchandise shipped to China from different international locations if U.S.-made parts make up greater than 25% of the worth. The U.S. Department of Commerce performed an audit of ASML’s EUV machine, two sources instructed Reuters, however discovered it didn’t meet the 25% threshold, in response to one of many folks. The U.S. Department of Commerce is now contemplating decreasing the 25% threshold in some circumstances, Reuters reported in November. With no approach to block the sale straight, the Trump administration pressed its Dutch ally to think about the safety points. Lithography tools falls below the purview of a global settlement referred to as the Wassenaar Arrangement, which coordinates export restrictions of so-called ‘dual-use’ know-how that has business and navy functions. U.S. Department of Defense officers met their Dutch counterparts a number of occasions to debate the safety dangers of the sale, two sources instructed Reuters. Meetings occurred on the Netherlands embassy in Washington in late 2018 and January 2019, two separate sources mentioned. Pompeo urged Rutte himself to dam the sale, regardless of business pressures to let ASML proceed, throughout a go to to the Netherlands final June, three sources mentioned. With a market worth of greater than 110 billion euros, ASML has grown to dominate the lithography market over the past 20 years and is the pleasure of Dutch business. “Our ask is that our allies and our partners and friends don’t do anything that would endanger our shared security interest,” Pompeo instructed reporters in The Hague on June 3. He didn’t point out chip tools particularly. The U.S. Department of State didn’t reply to a request for remark. Six weeks later, throughout his go to to the White House, Rutte was given a duplicate of the intelligence report. Reuters couldn’t decide whether or not U.S. President Donald Trump talked about the ASML deal to Rutte throughout the White House assembly. Slideshow (3 Images)ASML’s export license expired unused on June 30, 2019, and no new license was granted within the following eight-week interval throughout which a renewal request would usually be thought-about, in response to a public database of licenses printed by the Dutch Ministry of Foreign Affairs.     Netherlands Foreign Ministry spokeswoman Irene Gerritsen mentioned the Dutch authorities has sovereign discretion to grant licenses of dual-use know-how and wouldn’t touch upon particular circumstances. With or with out the EUV license, ASML expects its Chinese gross sales to extend in 2020 because it continues to ship earlier-generation tools. Reporting by Alexandra Alper in Washington, Toby Sterling in Amsterdam and Stephen Nellis in San Francisco; Additional reporting by Humeyra Pamuk in Washington; Editing by Jonathan Weber and Bill RigbyOur Standards:The Thomson Reuters Trust Principles.

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