Chip War Flare-Up: US Alleges ASML's Top Tool in China, Company Denies

U.S. Commerce Secretary Howard Lutnick has expressed significant concerns to senior ASML executives regarding the potential presence of one of the Dutch chipmaker’s extreme ultraviolet (EUV) lithography machines in China. These EUV systems are uniquely capable of printing the most advanced semiconductor patterns, and their transfer to China would represent a substantial breach of long-standing export controls imposed since the first Trump administration. The U.S. claims to possess evidence of ASML shipping EUV-related components and transport equipment to China but has yet to publicly disclose this evidence to either Bloomberg or ASML.

ASML vehemently denies these allegations, stating that no such EUV machine has ever existed in China. The company asserts that it meticulously tracks every machine shipped globally, confirming they are either in active use by monitored customers or have been dismantled and returned. ASML CEO Christophe Fouquet elaborated on the company’s internal safeguards, including a strict firewall that segregates employees with access to EUV technology, documentation, and training from those who do not, explicitly placing China-based staff outside this access perimeter. Fouquet emphasized the complexity and two-decade development of EUV technology, arguing that reverse-engineering such a machine without prior possession is effectively impossible.

ASML holds a crucial and singular position in the global AI industry, being the sole manufacturer of EUV lithography machines essential for producing cutting-edge processors used by companies like TSMC, which supplies Nvidia and Apple. This monopoly has made ASML Europe’s most valuable public company, with a market capitalization around $700 billion, driven by surging AI-related chip demand. The potential breach in export controls is therefore viewed as highly consequential, as it could enable China to advance its military and industrial AI capabilities.

While ASML does sell older-generation deep ultraviolet (DUV) tools to China—technology first shipped a decade ago—Fouquet presented this as a deliberate protective calculation. This strategy allows for continued business while maintaining a significant generational gap, preventing China from becoming a future competitor in advanced lithography. ASML anticipates approximately 20% of its 2026 revenue from these permitted sales to China, underscoring the commercial risks of jeopardizing its export license over a single illegal EUV transaction.

Adding another layer to this complex situation, the U.S. Commerce Department, under Secretary Lutnick, agreed to invest up to $150 million of taxpayer money into xLight, a startup developing next-generation light-source technology. xLight’s CEO positions the company as a future partner to ASML, aiming to integrate its hardware into ASML’s machines rather than replace them. However, ASML’s Fouquet remains unconvinced, asserting that ASML does not need xLight’s technology to maintain its lead. Whether this investment influences Lutnick’s scrutiny of ASML’s EUV exports is publicly unknown but raises questions about potential conflicts of interest. Furthermore, other ventures, like Peter Thiel-backed Substrate, are actively pursuing EUV-rival technology with direct competitive ambitions against ASML. Concurrently, a bipartisan bill in Congress seeks to broaden export controls, proposing an effective ban on all ASML DUV shipments to China, which would impact a fifth of the company’s expected 2026 revenue.