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  • Writer's pictureLeonardo Colla

How a small town in the Netherlands is the modern battleground of a war between China and the U.S.

In the small town of Veldhoven in the Netherlands something unexpected and unseen by many is going on that might just affect the rest of the world. But first, we must know about Advanced Semiconductor Material Lithography, or commonly called ASML. When first founded in the 70s as a joint venture between ASM and Phillips it set its main task as creating the equipment that is needed to create computer chips. Machines that companies such as Apple, Samsung, Microsoft, Google, Sony, Tesla, Intel, etc. use in their products that are sold to customers worldwide. But ASML wasn’t the only company in the chip market and was just a small business in the grand scheme of things. Their take-over of the industry began in the 1990s when a new technology to create smaller chips was discovered and only one company in the world was able to have the licensing, proper equipment, testing and creating these products. But why is it so important for us to be able to create smaller chips? A chip’s power is determined by the number of transistors it has, so the smaller they are the more power can be stored in one single chip. Usually, transistors used to be about 1 cm in size but throughout the years they managed to become smaller and smaller, to about 3 nanometers or about as big as a strand of DNA. Some experts have stated that this discovery put ASML competitors about 5 years behind, but some suggest that in reality, the gap would be at least 10 years. For this reason, ASML managed to become the most valued company in Europe and is under the spotlight of not only investors worldwide but also powerful countries. So, why is a small town of 45,000 habitants important in this case? ASML’s headquarters are in Veldhoven where 1/3 of its citizens are employed in the company and it’s just this small town that might be the real battleground of a geopolitical war between the U.S. and China. Being able to create the most sophisticated computing chips in the world also means you have a significant advantage over other nations technologically and economically. As mentioned by other journalists such as Alper and Shepardson, the U.S has officially struck a deal with the Netherlands in order to limit the export of ASML’s chips to the People’s Republic of China. This deal is to keep China’s technology one generation behind the Western World. This doesn’t only hinder the relationship between China and the U.S., but also it makes it mandatory for companies that produce chips with ASML’s technology to move production outside of China. This sentiment was expressed by China’s foreign minister, to which he stated: “Such bullying and hegemonic practices seriously violate market rules and disrupt the international trade order”. This deal also sounds sketchy from an investor point of view, since one of the rules of the stock market is transparency. But President Rutte has made comments in January that the Netherlands will only communicate about the deal in a limited fashion since it is an issue of national security. It also goes without saying that the country is also limited to speaking on such deals with the U.S. fearing possible retaliation from China. Some experts have speculated that the deal, which has yet to take full effect, has been made because the U.S. feared China was going to achieve the most advanced semiconductors in the world, which would put at high risk the strength of the U.S. as the world’s most powerful nation.

It goes without saying that such practices by the U.S. are detrimental to future peaceful relations with China. By stopping an entire country from advancing to the same level of technological innovation you risk harming the potential development of China in terms of its technological capabilities, which is exactly what the U.S. desires. But it also sets bases for more aggressive foreign policies by the CCP and further aggravates the world’s stage,making the divide between the Western Liberal democracies and the Asian superpower even more pronounced. Therefore, ASML gets to decide to which side it leans to and supplies their technology, and as of now it’s the U.S.

It is also interesting to point out international security in the EU. Since the war in Ukraine has started the European Union has been increasingly dependent on the U.S. for securing and protecting the European Countries. The People's Republic of China has been on the side of Russia and among the Western world this stand hasn’t been taken lightly, which only hinders the relationship of the country and European countries and further leaves place for U.S. accommodating policies.

Even though the U.S. might have won ASML over, China is loudly making itself present in Europe’s busiest port, the port of Rotterdam. China sees Rotterdam as part of its Silk Road, as they try to take more control over the second largest port in the world after Asia. The port of Rotterdam gets about 50% of its business from the country and in 2016 COSCO Pacific, which is a Chinese company, took 35% stake in the port. So, it seems the small country of the Netherlands of just 17.53 million people might just be where the world’s two most powerful nations collide.

President Joe Biden and Xi Jinping overlooking Veldhoven

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