Dutch PM downplays conflict over ASML after meeting with China's Xi

President Xi told Chinese state media he has warned Rutte against 'decoupling and breaking links' with China

BEIJING:

Dutch Prime Minister Mark Rutte on Wednesday downplayed conflict between the Netherlands and China over restrictions on the export of equipment made by Dutch firm ASML (ASML.AS), following a meeting with President Xi Jinping in Beijing.

Earlier this year, the Dutch government began denying licences for ASML to export advanced "DUV" tool lines to China, joining a US effort to curb chip exports to the world's second-biggest economy.

Now in doubt is whether The Hague will allow ASML to continue servicing the billions of euros worth of advanced equipment it has already sold to Chinese customers that now falls under export restrictions when current licences expire.

Rutte declined to take questions on whether his government may deny licences for ASML, the biggest maker of equipment for computer chip makers, to continue maintaining tools for those Chinese customers, as desired by Washington.

The Netherlands makes sure "when it's about our semiconductor sector and companies like ASML, when we have to take (export restriction) measures, that they are never aimed at one country specifically, and we always try to make sure the impact is limited," Rutte said.

His remarks reflect the diplomatic tightrope on which the Dutch government must walk, with ASML now a focus in the US-China "chip war".

Read also: China says US subsidies, tax incentives for domestic chip sector discriminatory

One of Xi's top policy goals has been to help China build up its domestic chipmaking industry, spending billions on subsidies. Meanwhile the US government is seeking to undermine China's ability to make its own chips, and has enlisted aid from the Dutch and Japanese governments.

Xi told Chinese state media he had warned Rutte against "decoupling and breaking links" with China, which is ASML's second-largest market after Taiwan.

"The Chinese people also have the legitimate right to development, and no force can stop China's scientific and technological development and progress," he told Rutte.

The export curbs so far have had only a modest impact on the financial performance of ASML, which dominates the global market for lithography systems - tools vital in helping to create the circuitry of computer chips.

But in the longer term if the Netherlands is seen as an unreliable business partner, Chinese chip makers may seek to replace ASML equipment, when possible, with that of domestic firm SMEE, or Japanese rivals such as Nikon (7731.T) and Canon (7751.T), which compete with ASML in some segments.