How power politics and morality issues invaded ASML's boardroom

In case China invades Taiwan, ASML could remotely shut down its advanced chip machines in China. Sources reported that to the Bloomberg news agency late last month. The news has reassured Americans, insiders said. Concerned parties themselves did not officially comment on the news. Taiwanese chip manufacturer TSMC - responsible for about 90 % of the world's more advanced chip production - could also remotely shut down machines. The news once again underscores the importance of technology in geopolitical conflicts. What does this trump card mean in the context of global power relations?

"It is good to know that we now have such a means of pressure ourselves. But, if ASML has to shut down machines when China invades Taiwan or sets up a blockade, it's already too late, because those chips will already be in the planes and ships flying and sailing toward Taiwan. We need a long-term vision to prevent conflict from happening at all. That can only happen if ASML takes its own responsibility now and stops supplying machines to China. Their machines are being used to build a strong Chinese military apparatus,” said Gerrit van der Wees.

A former Dutch diplomat, Van der Wees teaches the history of Taiwan at George Mason University and U.S. relations with East Asia at George Washington University.

Chip machines and factories are nowhere without supply chain

Frans-Paul van der Putten, a China and geopolitics analyst, emphasizes that both ASML and TSMC are part of the same chain. "ASML machines don't function without ASML doing the maintenance, and TSMC's factories lose their value if the network of suppliers stops. Those factors would go away if China invades Taiwan." Van der Putten is a senior research associate at the Clingendael Institute.

So pressing a stop button is actually not even necessary - it is enough to do nothing more. The news refers to a dialogue between the Netherlands and the United States, in which the latter likes the possibility of turning off semiconductor machines. Van der Putten: “There are different interests at play. The U.S. government wants as many guarantees as possible. They find it very important that advanced equipment does not end up in Chinese hands. For the Netherlands and Taiwan, it is important to say that the chip production chain is safe from a geopolitical point of view."

China tightens the thumbscrews

However, the likelihood of China invading Taiwan is increasing, according to Van der Wees. China is increasingly tightening its thumbscrews toward neighboring countries. Last week, it surrounded Taiwan to test its ability to “seize power” on the island and is provoking the Philippines in the South China Sea.

"Until recently, China did not have the military power and resources to pull off an invasion. But they have, in recent years, rapidly built up a huge military apparatus consisting of sophisticated fighter planes, ships, and drones. Indeed, China is now building more planes and ships than the United States did during the height of World War II,” Van Wees previously wrote in an opinion article for NRC.

'Millimetizing about nanometers'

And that's where ASML comes in. Because those ships and airplanes require masses of chips. According to Van Wees, the weight that a company carries - for better or worse - should be looked at more strictly. "As long as ASML supplies machines to China, in my view, it harms world peace. ASML's machines enable China to build more advanced aircraft and ships faster. Yes, they abide by export restrictions." According to ASML's quarterly report, the share of machines sold to China rose to a record 49%. "We in the Netherlands millimeter way too much about the nanometers of the machines. China is all about the numbers."

Van der Wees also thinks it is unwise for ASML to depend on Chinese orders. "It won't be long before Chinese machines that are very similar to ASML's machines come on the market. We've already seen that happen with several other technologies - electric cars, solar panels, wind turbines."

Recently, China announced it was investing €47.8 billion in its own semiconductor industry. It is the government's third round of investment. President Xi Jinping's drive to make China self-sufficient in semiconductors has become even more urgent after the U.S. recently instituted a series of export control measures.

ASML itself always says it can do quite well without China. For example, former top executive Peter Wennink said during an investor day that “there is enough demand in other places.”

'Excluding goes too far'

Van der Putten sees it as unrealistic that the company would exclude China of its own accord. "ASML mainly delivers to Taiwan, South Korea, or China. When you exclude one of those sales markets, it damages the company and the position of the Netherlands and Europe as a technological player."

Moreover, argues the analyst and researcher, the chip machines currently sold by ASML to China are used for the mass production of regular chips. Of these, the application is only partly military. "It goes much too far to then just stop supplying China altogether. It would greatly escalate the pressure we put on China. To stop supplying machines for regular chips to China would already be a big step for the U.S., let alone for a private Dutch company."

Morality of large companies

The morality of large companies that are (primarily) driven by money is a complex issue. Where is the line for slowing down China's modern militarization?

Van der Putten: “We are not at war with China, even though we do not supply arms to it for human rights reasons. And don't forget: America still spends more money on defense than the rest of the top ten countries (including China) combined. It has a gigantic advantage in size, experience, and technology. And what's more: it has full access to ASML's chip machines."

But, he also believes the US is our ally, and any weapon China has is a weapon that may one day be used against the US. "So, as the Netherlands, you have an implicit obligation not to facilitate that. We absolutely have to think about that." Van der Putten agrees with Van der Wees: the pressure China puts on neighboring countries through military force is a problem. But, he believes, “this is not happening in a vacuum. It is happening in a context where the U.S. has a presence in Asia and is putting pressure on China."