ASML, China and Dutch national security interests


On June 30, the Dutch government announced new restrictions on the export of semiconductor equipment. It is widely understood that these restrictions are aimed primarily at the relationship between ASML and its customers in China, even though the government claims its policy to be 'country-neutral'. According to Minister for Foreign Trade and Development Cooperation Liesje Schreinemacher, 'We've taken this step on national security grounds. It's good for the companies that will be impacted to know what they can expect. This will give them the time they need to adapt to the new rules.' Indeed, the announcement provides long-anticipated technical details on the equipment it covers, the procedural requirement (sales outside the EU require an export permit), and the date the new rules will become effective (1 September 2023). This is important information for ASML, its suppliers, customers, and investors.

What the government is not very clear about is why it decided to further limit the export of semiconductor equipment after it had already been blocking the sale to China of ASML's most advanced machines since 2019. The press statement released by the government refers only to 'national security grounds' and 'national security risks' related to the fact that advanced semiconductor equipment 'can make a key contribution to certain advanced military applications', and that 'the Netherlands bears an extra responsibility in this regard because this country has a unique, leading position in this field.' The Government Gazette of the Netherlands (Staatscourant no. 18212, Toelichting, I. Algemeen: aanleiding en doel, p.4) is somewhat more specific. It points at two overlapping concerns that provide the motivation for the new restrictions (as translated and paraphrased by me):

1) Semiconductors made with relevant equipment and technology could end up in the hands of an actor who uses them for military purposes that undermine Dutch 'public security interests', including international peace and stability.

2) The export of relevant equipment and technology could have significant long-term implications for the 'public security interests' of the Netherlands and its allies. These implications include, but are not limited to, the development of advanced weapons systems.

It notable that in the Gazette the government uses the term 'public security', instead of 'national security' (to which Schreinemacher referred in the press statement), seemingly emphasizing the broad security interests of the general public rather than those of the state (which are more clearly defined and seem more relevant here).

The text is not explicit about which security interests are at stake or how these are threatened. On the basis of the information made available by the government, three considerations seemingly play a role. First, there appears to be an assessment that the Chinese government uses or will use advanced semiconductors in ways that harm Dutch national (or public) security, perhaps by enhancing its capability to conduct cyber-attacks against Dutch targets, or even targeting Dutch society at large. The General Intelligence and Security Service of the Netherlands recently called Chinese data theft the biggest threat to Dutch economic security. It is also possible that the Dutch government takes into account the possibility of a military incident at sea, as it occasionally sends warships to East Asia (the next naval mission being planned for 2024). Second, the text seems to refer the Chinese military posing a threat to regional stability in Asia. China's use of military means to threaten and put pressure on Taiwan, and the central role of the Taiwan issue in the regional security order in East Asia, is likely a key element in the government's assessment of such a threat. And third, in conjunction with media reports that the US government has been exerting pressure on the Netherlands to restrict exports of semiconductor equipment, it also appears to refer to the technological and military balance of power between China and the US. The US government has made it clear that it expects allies, especially those with a strategically important semiconductor sector, to support American restrictions on advanced technology transfers to China.

These considerations, if they are indeed underlying Dutch policy on the export of semiconductor equipment, suggest that the government works with several assumptions that require serious consideration. Some of these assumptions seem to be of a technical nature (the relationship between ASML's products, Chinese semiconductor-based capabilities and national security vulnerabilities of European countries), while others are geopolitical (the dynamics of the regional security order in East Asia and how these are linked to security in Europe). Given the important potential consequences of such assumptions for EU-China relations and Transatlantic security cooperation, it would be good if the Dutch government would be more explicit about its considerations.