ASML stock falls due to US plan to restrict chip exports to China

ASML Stocks fell on Tuesday after U.S. lawmakers last week proposed further measures that could restrict additional chip manufacturing tools from China and impact the Dutch semiconductor giant’s already vulnerable sales to the country.

Dutch ASML shares were down about 2.6% as of 6:11 a.m. ET.

On Thursday, a bipartisan group of lawmakers introduced the Multilateral Coordination for the Control of Hardware Technology (MATCH) Act, which aims to cut China off from chip-making tools and target the nation’s most important semiconductor companies.

The office of Rep. Michael Baumgartner (R-Wash.), who sponsored the bill, said in a statement on April 2: “The United States has imposed broad export controls to slow China’s domestic production of semiconductors, but our allies have not fully responded to these measures. This misalignment leaves a significant gap, which China continues to exploit.”

ASML did not immediately respond to a request for comment from CNBC.

The United States has imposed various semiconductor export restrictions on China in recent years.

Many of them focus on cutting-edge semiconductor technology. ASML manufactures the extreme ultraviolet (EUV) lithography machines needed to produce some of the most advanced chips on the planet.

ASML has never exported these machines to China.

The Dutch company also manufactures deep ultraviolet (DUV) lithography equipment. DUV lithography machines are less advanced and are used to make other types of semiconductors, such as memory chips found in everything from laptops to cell phones.

Some of ASML’s DUV machines are subject to Dutch export licenses.

If passed, the MATCH Act would ban even ASML’s DUV lithography equipment, which can be used to make less advanced semiconductors and has so far been able to be purchased by China’s largest chip makers.

ASML said in January that China’s share of total sales this year will fall to about 20% from 33% in 2025. This figure is before the new regulations proposed by the US.

If the restrictions come into effect, they could put pressure on Dutch companies’ already declining sales in China.

“This bill is in its early stages and its outcome is uncertain, but it does create a geopolitical overhang. At this stage, it is unclear whether all DUV tools are potentially of concern or whether the current restrictions on some DUV immersion tools will be extended,” ODDO BHF head of equity research Stephen Fourie said in a note on Tuesday.

If a broader DUV ban were implemented, there would be “some volatility” in ASML’s performance, which “could result in some increase in orders in the short term (before the regulations were implemented), but could impact medium-term performance,” Fouri said.

“The stock price reaction indicates that the proposals coming out of the U.S. Congress could have a fairly significant impact on ASML,” Ben Ballinger, head of technology research at Quilter Cheviot, told CNBC.

“This law will affect older versions of the company’s lithography tools, which account for about 10-15% of overall sales. Of that mix, China accounts for about 50%, so we expect a fairly large hit of about 5%, but that will likely decline over time.”

Ballinger and Hooley both noted that the proposal is in its early stages and needs to go through the U.S. legislative process.

Analysts told CNBC that Washington’s various regulations over the past few years have actually helped boost China’s domestic semiconductor industry, with several companies reporting record profits last year. The country has succeeded in finding alternatives to some of the technologies it has been disconnected from, such as high-bandwidth memory. Nvidia competitors.

However, China’s largest chip maker, Semiconductor Manufacturing International, Inc. (SMIC) and Hua Hon still rely on ASML’s DUV tools to manufacture less sophisticated chips.

There are no local alternatives to ASML for EUV, and few alternatives to DUV lithography machines globally.

If the U.S. proposal is approved, “it could disrupt China’s semiconductor manufacturing capabilities, as China is completely dependent on ASML tools today,” Houli said.