ASML Considers Building Plants in Southeast Asia to Reduce Exposure to China

ASML Holdings NV is eyeing countries from Southeast Asia to build their next plants for chip-making machines, which is an effort to reduce the company's exposure to the US-China chip war.

NETHERLANDS-TECHNOLOGY-INTERNET-SEMICONDUCTORS — An employee walks past an ASML logo, a Dutch company which is currently the largest supplier in the world of semiconductor manufacturing machines via photolithography systems at the company's headquarters in Veldhoven on April 17, 2018. - They call it "the shrink" -- it's the challenge of how to pack more information onto the microchips which power everything from our phones to our computers, even our coffee machines. And pushing today's boundaries of science and technology is the Dutch company ASML, which since its foundation in 1984 has quietly become a world leader in the semiconductor business. EMMANUEL DUNAND/AFP via Getty Images

Considering Southeast Asia

Representatives from a dozen tech companies are set to visit Southeast Asian countries including Vietnam, Malaysia, and Singapore next week. South China Morning Post reported that ASML Holding NV is included among the companies as the company considers building its next plant in these countries.

Dutch public body Brabant Development Agency noted, "The majority of the companies [are] joining because they are considering expanding or setting up production locations in either Vietnam or Malaysia."

The organized trip was prepared by the agency, along with Brainport Industries. Almost 200 high-tech manufacturing companies will be represented on a trip based near the Dutch city of Eindhoven.

As per the report, the possible investment is part of ASML's wider and longer-term strategy to reduce its exposure and reliance on China amid the chip war. In fact, a dozen companies included in the trip are all contractors to ASML, which is considered one the world's top suppliers to semiconductors manufacturers.

Also Read : China Lambasts Netherlands for Following US in Restricting Chip Access

Neways is included in the trip, ASML's supplier to develop electrical control units, power controls, and wiring systems for lithography systems. Brainport added that NTS Group will also join the business trip, which helps ASML to provide precision mechanics tools.

Reuters reported that Singapore is one of the heavily considered countries as a potential location for ASML's regional headquarters. However, one of the companies was in advanced talks with partners in Vietnam to build a factory.

Blocking Chip Exports to China

Last March 8th, the Dutch government complied with the United States' pressure to block the sale of ASML's technology to China as they released new restrictions in an effort to protect the Netherlands' national security.

Because of these restrictions, companies will have to apply first for a license to export chip technology but this would only apply to high-specification systems that can make the smallest, most powerful chip tools made by ASML.

Because of this, Foreign Ministry spokeswomen from China expressed their criticisms of depriving China of its right to development. She stated, "We firmly oppose the Netherlands's interference and restriction with administrative means of normal economic and trade exchanges between Chinese and Dutch enterprises."

Chinese vendors are unable to manufacture high-end products specifically made for smartphones, servers, and other advanced technology, hence why the country relies on other companies from different regions like the Netherlands' ASML. The lack of access to ASML technology is a "critical hindrance" to the country's efforts to build a domestic chip industry.