If we talk about semiconductor factories, names like Foxconn or TSMC come to the fore. It is clear that they are two giants, but In recent months there has been a lot, a lot of talk about ASML. And not because of controversies related to the conditions or the fact that it pays more to those who manufacture Huawei than to those who manufacture iPhone, as happens with other companies, but because they are in the middle of a commercial and technological war.
Next, Let's see why ASML is in the eye of the hurricane in the conflict we are experiencing between China and the United States and, above all, what implications this whole technological soap opera has for the industry and users.
Why is there so much talk about ASML?
ASML is a European company, from the Netherlands, specifically. And, unlike others like Samsung, SMIC or TSMC, they do not manufacture processors or chips, but something much more important. And it is that, ASML has the technology to manufacture the machines necessary in chip manufacturing.
Therefore, even in years in which the semiconductor industry has not done well due to the crisis of this component, ASML achieved impressive sales numbers. There are two reasons: they are very good at what they do and, furthermore, they have no competition.
ASML currently produces the most advanced extreme ultraviolet lithography machinery. It is the technology necessary to create chips with increasingly smaller lithography and, without this type of machines, the steps at 3 or 2 nanometers that the industry pursues seem… complicated.
That said, and knowing that ASML is a vital piece of the technological puzzle, it is also a goal. China needs the latest machinery to continue boosting its semiconductor industry. The United States, for its part, is exerting its Western influence to ban ASML from selling its advanced machines to China.
ASML machine NXE3400B. Image from ASML
Both the United States and the Dutch Government have implemented measures to ensure that ASML cannot sell certain machines to China, the most advanced. Yes, they can continue to export machines that are not of the latest generation -the DUV-, but the UVP and EVE, necessary to achieve this miniaturization of the chips, cannot fall under the control of China.
What is China's response?
The situation between both powers has been tense for years, something that intensified with the veto of Huawei. However, with the recent launch of the Huawei Mate 60 Pro and its banned components, the United States has tightened the screws on China further.
The escalation occurred when we found out that China had managed to manufacture a 7 nanometer chip with 5G technology. The United States did not think that this was a realistic scenario in the short term and, furthermore, they continue to think that it is an unsustainable situation if they want to mass produce.
However, Huawei has brutal forecasts for next year, phones like the Nova 12 show that they continue to develop new processors and it is something that the United States wants to avoid, or stop, at all costs.
The Asian giant is taking measures to strengthen their industry and factories can use complex and heavy manufacturing processes to go beyond 7 nanometers without needing ASML's latest generation machines, but it is clear that the process will be complicated.
The implications of the technological and commercial war for the user
Image from ASML
Having summarized the situation, it is time to ask… How does this whole soap opera with ASML as the protagonist affect us? We may think that there is no way as long as other companies continue working with Qualcomm or MediaTek processors manufactured in TSMC plants, for example, but in the medium and long term, it can affect us.
The most immediate thing is what has to do with Huawei. Although the Chinese company is not launching its latest mobile phones in the West, if it did, we would receive less powerful mobile phones than those of the direct competition (because the chips they are producing are a generation behind those of Qualcomm or MediaTek).
However, we should not think that the price of these mobile phones would be lower because the resources that China is investing – specifically the company SMIC – to manufacture these processors are considerable. Therefore, We would have mobile phones at the same price or higher than those in their range, but with lower performance.
And this is not just about Huawei phones. China has already shown that it does not hesitate when it comes to responding to Western vetoes. For example, The Asian country controls most of the processing of rare earths. This is used to create many electronic components, but especially magnets and parts that are inside the batteries of electric cars.
With China placing obstacles on these materials, access to them will be more expensive and there may be three scenarios: that the electric car production chain is not supplied, slowing down vehicle deliveries to customers. That their price is higher because the raw material has risen. Or both situations at the same time.
In fact, Europe is already concerned about China's control of both rare earths and elements such as gallium or germanium which, again, are crucial for the electronics industry.
Therefore, All this is not just about the United States against China and Huawei in between, but it affects a growing industry – that of electric vehicles – and many other branches of the technology industry worldwide. And when that happens, in the end the person affected is always the consumer… and his pocket.
And, obviously, These restrictions are also affecting an ASML that may see its profits plummet if China, one of the most important countries in the world, cannot buy the latest generation machinery. What is clear is that the conflict is far from over and the situation is increasingly tense.
Cover image | ASML
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