Washington squeezes ASML's China business

Every AI chatbot and image generator depends, somewhere down the line, on advanced chips. Those chips are made at scale using machines from one company: ASML, in the Dutch city of Veldhoven. In a world run on books, ASML builds the printing presses.

Its lithography systems use extreme ultraviolet light to project circuit patterns onto silicon wafers, a technology no other firm has been able to replicate at scale. The company reported €32.7 billion in net sales for 2025 and guided €34 billion-€39 billion for 2026, with AI demand doing much of the pushing (ASML annual report).

That leaves the Netherlands, almost by accident, sitting on one of the central choke points in the AI race. This week, that position produced a neat European contradiction.

On June 23rd, the Netherlands joined Pax Silica, a US-led grouping meant to keep minerals, energy, chips and data centres inside trusted supply chains (US State Department). In the same week, Dutch trade minister Sjoerd Sjoerdsma went to Washington to argue against a US bill that would let Congress shape what Dutch companies can sell, and to whom (Reuters).

The Netherlands wants the alliance. It does not want the alliance’s rules written unilaterally in Washington. That is the European problem in miniature.

Why a chipmaking machine becomes a weapon

Pax Silica was launched in December 2025 and has since expanded to more than a dozen partners, including Japan, South Korea, India and several EU members. Its architect, Under Secretary Jacob Helberg, starts from a hard industrial premise: the AI race will be decided not only by software, but by the physical system underneath it, meaning compute, minerals and factories (Hudson Institute, Straits Times).

That logic is not wrong. If critical supply chains are concentrated in unfriendly hands, they can be cut. The difficulty begins when coordination among allies becomes coercion among allies.

ASML’s most advanced machines, which use extreme ultraviolet, or EUV, light, are already barred from sale to China under export controls. These are government rules that decide who can buy sensitive technology. The MATCH Act, a bipartisan bill introduced in Congress in April, would go further (Baumgartner House release).

It would also block exports of ASML’s older deep ultraviolet, or DUV, machines. They are less advanced, but still valuable, and thousands are already running inside Chinese factories. The bill would also restrict servicing for that installed equipment. That matters because lithography machines are not plug-in appliances. They need constant specialist maintenance, software updates and replacement parts from the manufacturer. Cut the service line and even machines already sold will, over time, become unusable (Tom's Hardware).

For Europe, the sovereignty issue is blunt. The MATCH Act would give allies 150 days to adopt equivalent restrictions. If they did not, Washington would extend US legal authority over foreign-made products, effectively telling a Dutch company to follow American law (Kim Senate release). The bill has passed committee but not yet gone to a full vote, and TechCrunch reports it may need a larger legislative package to become law.

What Europe stands to lose

The first exposure is financial. China accounted for roughly 33% of ASML’s 2025 sales, falling already to 19% of net system sales in the first quarter of 2026 (SCMP, ASML Q1 2026). That revenue helps fund the research and development behind the next generation of machines. If it shrinks too far, Europe’s lead in lithography becomes harder to defend.

ASML is Dutch, but the industrial system around it is European. German firms ZEISS and TRUMPF supply the optics and laser systems that make EUV technology work (ZEISS, TRUMPF). Restrictions on ASML therefore move through a wider supplier base.

That sits awkwardly beside Brussels’ own strategy. The EU Chips Act aims to double Europe’s global semiconductor market share to 20% (European Commission). The official line on China is "de-risking, not decoupling" (EU economic security strategy). Yet export-control decisions still sit with individual member states. So the Netherlands is left negotiating with Washington on its own over a machine on which Europe’s wider industrial strategy depends (CSDS VUB).

As Bruegel has argued, ASML’s monopoly gives Europe real leverage in a fragmenting chip world, but only if Europe uses it collectively. Sjoerdsma told Washington that the Netherlands shares the aim of keeping dangerous technology away from hostile actors. His objection was to "cooperation by force" (Reuters).

That is the line Europe now has to hold. If it cannot, "trusted partner" may come to mean managed dependency: higher costs, weaker bargaining power and less control over the industrial base on which AI will be built.