ASML Discloses Potential Export Violations, Not Expecting Dutch Controls for 'Months'

Dutch chip company ASML may have violated export controls stemming from a data theft incident involving a now former employee, the company said in its 2022 annual report released this week. The semiconductor company also said it’s expecting the Netherlands to impose new export restrictions on advanced chip-related items to China but doesn’t expect the measures to take effect for “many months.”

ASML said it recently “experienced unauthorized misappropriation of data relating to proprietary technology by a (now) former employee in China.” The company began a “comprehensive internal review,” and while it doesn't believe the potential violations were “material to our business,” it submitted a disclosure to “relevant” government authorities. As a result of the incident, “certain export control regulations may have been violated,” the company said. “We are implementing additional remedial measures in light of this incident.”

The company stressed that it’s “committed to compliance with all applicable export controls laws globally” and has compliance procedures in place. Its employees are required to follow those procedures, ASML said, adding that it also has information technology controls and “other measures in place designed to facilitate protection against inadvertent violations of export control requirements.”

ASML also said it “regularly” assesses the effectiveness of its export control policies. It most recently updated its procedures after the U.S. in October published a new rule imposing export controls on advanced semiconductor-related items destined to China (see 2210070049 and 2211010042).

The U.S. for months has been working to convince the Netherlands and Japan to impose export controls on China similar to the restrictions outlined in the October rule, and in January the countries reportedly reached an agreement (see 2301270002). ASML said it “understand[s] that steps have been taken that would cover advanced lithography tools as well as other types of equipment,” but the terms of the three-nation agreement “remain confidential for now.”

It also said it doesn’t expect the new measures to have an immediate impact. “We expect that it will take many months for the governments to write and enact new rules,” ASML said. “Combined with the current market situation, we do not expect these measures to have a material effect on our expectations for 2023.”

The company said its short-term “business environment” is “clouded by uncertainty” due to macroeconomic and geopolitical concerns, including export controls. The restrictions are “threatening the development of the global village that contributed so much to a lot of the innovation we have seen in recent years,” ASML said. “If countries or trade blocks withdraw into their own territories, then innovation will be less effective and more expensive.”

It also said the risk of further restrictions on exports or cross-border investments “is high,” particularly between the U.S. and China. “The tensions between China and the US may lead to a decoupled ecosystem and -- in the longer term -- overcapacity,” ASML said. “Given the important role both countries play in the semiconductor supply chain, this can have a significant impact on our industry.”