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The United States of America has dealt yet another major blow to China’s ambition of dominating the manufacturing of silicon chips. After TSMC announced that they would be tripling their investment in the U.S. to 40 billion dollars, reports have now emerged that the Netherlands is planning to impose massive curbs on its tech companies from dealing with chip fabrication plants based in China or owned by the Chinese state.

One of TSMC’s most significant reasons to invest in the U.S. and set up foundries and fabrication plants is that the Taiwanese company was under constant threat from China. China, which already has a stronghold over the production of most electronics, has been eyeing Taiwan’s silicon chip manufacturers like TSMC and Micron for years. TSMC and Micron are two of the biggest fabricators of silicon-based chips, producing about 60 to 70 percent of all microprocessors used today.

Last month, Dutch Trade Minister Liesje Schreinemacher said the Netherlands was in talks with the U.S. government about new export restrictions for semiconductor equipment to China. Under pressure from the United States, the Dutch government since 2018 has not allowed the country’s largest company, semiconductor equipment maker ASML Holdings NV, licenses to ship its most advanced machines to China because it is believed that these machines have potential military applications.

Although most of the silicon-based chips are produced in either Taiwan or China, the licenses of some of the core manufacturing processes are owned by Dutch corporations. Moreover, a handful of Dutch firms mainly produce the machinery used to fabricate silicon chips.

ASML, a key maker of equipment for silicon-based chips, had sales of over 2 billion euros or $2.1 billion to customers in China in the year 2021. According to a Bloomberg report, an agreement regarding the Dutch curbs on chip exports could come as soon as next month, adding that it is unclear what the new restrictions mean for ASML’s sales to China. According to the Dutch statistics office, China is also the Netherlands’ second-largest trade partner after Germany.

The Biden administration in early October published a sweeping set of export controls, including a measure to cut China off from specific semiconductor chips made anywhere in the world with U.S. tools. ASML and other Dutch companies source components from several U.S. firms and use patented technology in making the machines that chip fabricators use.

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