ASML exposes intellectual property theft by China employees

A Dutch group that plays a crucial role in the global chip supply chain claims that export controls may have been brokenDutch chip toolmaker ASML has revealed an employee in China recently stole information about its technology, which may have resulted in export controls being violated, in an incident that underscores the company’s importance in the global battle to produce advanced semiconductors.

ASML is an international leader in producing so-called lithography machinery that uses light to etch semiconductors. It stated in its annual report that it was “subjected to misappropriation data relating to proprietary tech by a (now ex) employee in China”.

“Although the misappropriation of funds is not material to our business,” the statement said. This was because recent international export control regulations relate to both the supply and use of information.

According to the company, it reported the incident the US and Dutch authorities.

ASML is the largest European tech company with a market capitalisation exceeding EUR248bn. It is also the only company to make ultra-sophisticated UV lithography (EUV), machines. Since 2019, ASML has been embroiled in the trade war between Washington, Beijing. A shipment of its EUV machine to China was stopped.ASML is familiar with the issue of IP theft, and tech transfer. ASML’s most recent annual report raised concerns about a Chinese company that produces products to increase chip yields. However, the incident occurred in 2015.

After concerted lobbying by the US, the Dutch-Japan governments agreed last Month to tighten their restrictions regarding certain tools and technologies that could help China’s expansion in the advanced chip sector.

Peter Wennink, ASML chief executive, stated in a statement that he understood these new measures to “cover advanced lithography instruments as well as other types.”

He stated that the geopolitical bifurcation between socio-economic blocs — and the associated export/import controls — was threatening the development the global village that has contributed so much to innovation in recent years. “If trade blocs or countries withdraw from their territories, innovation will be less efficient and more costly.”

However, he noted that he didn’t expect these new measures will have a material effect on ASML’s business in 2023.

The toolmaker reported last month a record order backlog exceeding EUR40bn. It also forecasts that sales will increase by 25% this year. Wennink stated that export controls can be reversed by selling to customers from its growing backlog.

Some analysts question whether China could increase its efforts to create its own toolmaking industry, given ASML’s monopoly of advanced machines needed to make advanced chips.

Huawei filed a patent application in December for one of the most advanced aspects of a EUV machine.