The publication of ASML's 2023 Annual Report has revealed some interesting insights into how the photolithography producer remains diplomatic in times of global tension. Peter Wennink (President, Chief Executive Officer and Chair of the Board of Management) discussed his company's carefully considered tightrope act—here is his message to stakeholders: "In 2023, demand for our DUV systems continued to be strong, particularly in China. During the previous two years, our Chinese customers had received significantly fewer systems than they had ordered, due to global demand for our systems exceeding supply. However, the shifts in demand timing from other customers that we experienced in 2023 meant that we had the opportunity to backfill these orders for mature and midcritical nodes to China, while of course complying with export regulations." ASML is seemingly keen to continue doing business with Chinese customers, despite having to juggle with strict international trade rulings—as revealed in their financial report, trade in this region accounts for "26.3% of our 2023 total net sales." This places China in a second tier position, just behind Taiwan (29.3% of 2023 total net sale).
ASML was expecting to deliver a grand total of
600 DUV equipment units to Chinese customers by the end of 2025, but trade restriction adjustments nixed that avenue of business. The report's "Strategy and products" section highlights the company's concerns about narrowed lanes: "Geopolitical tensions may result in export control restrictions, trade sanctions, tariffs and more generally international trade regulations which may impact our ability to deliver our systems, technology, and services." China's leading foundry—Semiconductor Manufacturing International Corp (SMIC)—is reportedly targeting a 5 nm process node, although this would require a major
readjustment of its existing collection of (older) lithography equipment. SMIC's flagship Shanghai location cannot upgrade to the most
advanced DUV machinery in ASML's catalog, therefore workers are reliant on slightly antiquated gear (previously tasked with 7 nm manufacturing)—low yields and added expense are the anticipated headaches.