Export Controls
Export controls physically block what you can buy or sell — unlike tariffs (which raise the price) and sanctions (which freeze financial assets).
The Semiconductor War
What’s Controlled
The US, Netherlands, and Japan formed a coalition to restrict China’s access to advanced chip-making technology:
| Item | Who makes it | Why it matters |
|---|---|---|
| EUV lithography machines | ASML (Netherlands) | Required for chips < 7nm. Physically massive (~200 tons), requires ASML service, has remote monitoring |
| DUV lithography (advanced models) | ASML | Older tech but can still make 7nm with multi-patterning — these are now partially restricted too |
| Chip design software (EDA) | Cadence, Synopsys (US) | Needed to design modern processors |
| Chemical etching equipment | Tokyo Electron (Japan) | Critical for multi-layer chip fabrication |
How China Fights Back
Huawei Mate 60 Pro (2023): It contained a 7nm chip (Kirin 9000s) made by SMIC (China’s largest foundry). This proved China could make advanced chips without the best ASML machines.
The method — multi-patterning:
- SMIC used older ASML machines (DUV, not banned at the time)
- Each wafer is run through the machine 4x, overlapping exposures to create finer features
- Like printing a high-res image on a low-res printer by printing 4 times and overlapping
| Normal (TSMC) | SMIC multi-patterning | |
|---|---|---|
| Yield | 90%+ | ~50-70% |
| Time per wafer | 1x | 4x |
| Cost per chip | Low | High |
China’s Retaliation
China banned export of rare earth elements (EV motors, wind turbines, fighter jets, phone screens). China controls ~90% of global rare earth refining. Also restricted gallium and germanium (semiconductors, fiber optics).
The Asymmetry
| US / Allies | China | |
|---|---|---|
| Leverage | Chip making tools (hard to replicate) | Rare earth processing (hard to replicate) |
| Time horizon | China can’t build its own ASML EUV in < 10 years | US/Europe building alternative rare earth supply (5-7 years) |
| Mutual pain | China’s AI/military chip development stalls | US EV production, military optics, fighter jets hit |
Can China Get Around It?
Transshipment
Routing restricted goods through third countries (Malaysia, Singapore, Hong Kong). The US responded with foreign direct product rule — if a chip is made with US technology anywhere in the world, it’s controlled. ASML machines in Taiwan can’t be resold to China. TSMC can’t make chips for Huawei.
Reverse Engineering
China has reverse-engineered some older ASML models. But EUV machines require:
- Mirrors so smooth a 1mm bump would be a mountain (atomic-level precision)
- Vacuum chambers the size of a bus
- A supply chain of 5000+ suppliers in Europe
Copying the design isn’t enough — the manufacturing ecosystem can’t be replicated quickly.
Recruiting Talent
ASML engineers being hired by Chinese companies has been reported. But ASML machines have:
- Remote kill switches — if a machine moves to a banned customer, ASML can shut it down
- Mandatory service contracts — the machines break without ASML technicians
Where China Stands Today
| Node | China can do | Dependency |
|---|---|---|
| 28nm+ (mature) | Yes, abundant | None |
| 14nm | Yes, decent yield | None |
| 7nm | Yes (SMIC), low yield, expensive | DUV lithography (partially restricted) |
| 5nm | No | EUV lithography (fully blocked) |
| 3nm | No | EUV lithography (fully blocked) |
| 2nm | No | EUV lithography (fully blocked) |
| AI chips for military | Limited — low yield, low volume | Needs production at scale |
The gap: China can make some advanced chips for phones (millions of units), but for data centers and military AI (hundreds of millions), they can’t produce efficiently enough. The bottleneck isn’t the science — it’s the tooling.
Related
- Supply Chain Advantages — why China’s manufacturing ecosystem is hard to replicate
- Trade & Tariffs — how export controls differ from tariffs
- The Dollar System — financial sanctions as a parallel weapon