ASML warns of trade restrictions and subsidies leading to chip shortages
ASML Holding, the largest supplier of chipmaking equipment, has warned of trade restrictions with China, as well as countries implementing their own chip subsidies. ASML CEO Peter Wennink also stated that subsidies like the US Chip Act or the EU Chip Act will lead to new manufacturing capacity that is not used at first, creating more oversupply and shortages. The tech sector is currently facing a glut of semiconductors as global PC shipments continue to decline.
China’s race to buy older tools
Peter Wennink made the comments after ASML posted solid first-quarter earnings last week. He said sales in China would rise as Chinese chipmakers rush to buy older tools that don’t fall under US-led restrictions, which the Dutch government said it would adopt in March. These restrictions also include Japan, and involve the only three countries that are home to manufacturers of advanced microchip printing machines. The Biden administration is trying to slow down Beijing’s technological and military advances by hampering its semiconductor industry.
ASML dominance in the market
ASML dominates the market for lithography systems used to create tiny chip circuits, and it’s the largest technology company in Europe (by market capitalization). It previously sold more than 8 billion euros of advanced machinery used to make semiconductors to Chinese customers since 2014. Wennink at the ASML annual meeting on Wednesday said it was “logical” for China to seek to develop its own semiconductor equipment when it has restrictions on buying foreign-made technology products.
Market access is crucial
Wennink reportedly said he was not concerned that rivals in Japan, the US, or China were close to building cutting-edge commercial lithographic products. “But it can happen, of course, so it is absolutely essential that we continue to have access to the China market,” which is the world’s largest market for computer chips, he said. The ASML CEO said that policies like subsidies in the US, China, and Europe will lead to new manufacturing capacity that is not used at first, leading to more excesses and shortages, such as the shortages from the Covid-19 pandemic and the current excess supply.
The global chip market set to double
Wennink reportedly said the global chip market is still set to double to $1.0 trillion-$1.2 trillion by the end of the decade. He cited an anonymous automaker in mainland China, which is ASML’s third-largest market after Taiwan and South Korea. That Chinese automaker reportedly plans to make so many EVs in the next three years that it would require “six or seven full-fledged logic semiconductor factories” that have yet to be built.
Conclusion
The tech sector has been experiencing a rollercoaster ride in chip supply, demand, and trade restrictions. ASML’s CEO Peter Wennink warns of oversupply and shortages due to subsidies and trade restrictions implemented by various countries. Wennink emphasizes that market access is crucial, and policies must be put in place to ensure the flow of chips and the growth of the chip industry. As per information from the source, the global chip market is set to double to $1.0 trillion-$1.2 trillion by the end of the decade.
