Pressure Point

Image source: Pavel Kapysh - Shutterstock

What's going on?

The US is reportedly pushing for chipmaking equipment manufacturer ASML to stop selling even more of its products to China.

What does this mean?

As the world’s biggest producer of key chipmaking equipment, ASML is a crucial part of global tech companies’ supply chains. But the Dutch government has already banned the company from selling its most advanced gear to Chinese companies, and the US now wants it to go a step further to keep China – the biggest buyer of chipmaking equipment in the last two years – from gaining even more influence over the semiconductor sector. It’s now reportedly piling pressure on the Dutch government to expand ASML’s ban to mainstream technology, essential for the kinds of chips used in cars, phones, and more. ASML isn’t happy, and nor are its investors: analysts think the move could hit its revenue by as much as 10%, and its stock fell 8% after the reports emerged.

Why should I care?

For markets: Tough love.
The push for more restrictions goes to show the growing tension in a $550 billion industry that plays a key role in everything from defense to artificial intelligence. But while this ban would hit Chinese chipmakers in the short term, any restrictions could also force the country to improve its own capabilities. That would essentially hand its manufacturers a bigger domestic market share, which might be why the stocks of Chinese chipmakers surged on Wednesday.

The bigger picture: The US takes with one hand…
The US is picking and choosing its battles with China. There’s speculation, for example, that it’ll roll back hundreds of billions’ worth of tariffs on Chinese consumer goods as soon as this week (tweet this). This isn’t out of the goodness of its heart, mind you: lower taxes should help bring down the cost of everyday products until the Federal Reserve gets a handle on inflation.

Originally posted as part of the Finimize daily email.

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