A globally critical chip firm is driving a wedge between the U.S. and the Netherlands

Washington has its eyes connected the Netherlands, a tiny but important European state that could clasp the cardinal to China's aboriginal successful manufacturing cutting-edge semiconductors.

The Netherlands has a colonisation of conscionable implicit 17 cardinal radical — but is besides location to ASML, a prima of the planetary semiconductor proviso chain. It produces a high-tech chip-making instrumentality that China is keen to person entree to.

The U.S. appears to person persuaded the Netherlands to forestall shipments to China for now, but relations look rocky arsenic the Dutch measurement up their economical prospects if they're chopped disconnected from the world's second-largest economy.

ASML, headquartered successful the municipality of Veldhoven, does not marque chips. Instead, it makes and sells $200 cardinal utmost ultraviolet (EUV) lithography machines to semiconductor manufacturers similar Taiwan's TSMC.

These machines are required to marque the astir precocious chips successful the world, and ASML has a de-facto monopoly connected them, due to the fact that it's the lone institution successful the satellite to marque them.

This makes ASML 1 of the astir important spot companies successful the world.

U.S. unit connected the Netherlands appears to person begun successful 2018 nether the medication of erstwhile President Donald Trump. According to a Reuters study from 2020, the Dutch authorities withdrew ASML's licence to export its EUV machines to China aft extended lobbying from the U.S. government.

Under Trump, the U.S. started a commercialized warfare with China that morphed into a conflict for tech supremacy, with Washington attempting to chopped disconnected captious exertion supplies to Chinese companies.

Huawei, China's telecommunications powerhouse, faced export restrictions that starved it of the chips it required to marque smartphones and different products, crippling its mobile business. Trump besides utilized an export blacklist to chopped disconnected China's largest chipmaker, SMIC, from the U.S. exertion sector.

President Joe Biden's medication has taken the battle connected China's spot manufacture 1 measurement further.

In October, the U.S. Department of Commerce's Bureau of Industry and Security introduced sweeping rules requiring companies to use for a licence if they privation to merchantability definite precocious computing semiconductors oregon related manufacturing instrumentality to China.

ASML told its U.S. unit to halt servicing Chinese clients aft the instauration of these rules.

Pressure connected the Netherlands to autumn successful enactment with U.S. rules continues. Alan Estevez, the nether caput of commerce for manufacture and information astatine the U.S. Department of Commerce, and Tarun Chhabra, elder manager for exertion and nationalist information astatine the U.S. National Security Council, reportedly spoke with Dutch officials this month.

"Now that the U.S. authorities has enactment unilateral end-use controls connected U.S. companies, these controls would beryllium futile from their position if China could get these machines from ASML oregon Tokyo Electron (Japan)," Pranay Kotasthane, chairperson of the high-tech geopolitics programme astatine the Takshashila Institution, told CNBC.

"Hence the U.S. authorities would privation to person these unilateral controls into multilateral ones by getting countries specified arsenic the Netherlands, South Korea, and Japan connected board."

The National Security Council declined to remark erstwhile contacted by CNBC, portion the Department of Commerce did not respond to a petition for comment.

A spokesperson for the Netherlands' Ministry of Foreign Affairs said it does not remark connected visits by officials. The ministry did not reply to further questions from CNBC.

Last week, U.S. Secretary of State Antony Blinken hailed the "growing convergence successful the attack to the challenges that China poses," peculiarly with the European Union.

But the representation from the Netherlands does not look arsenic rosy.

"Obviously we are weighing our ain interests, our nationalist information involvement is of utmost importance, evidently we person economical interests arsenic you whitethorn recognize and the geopolitical origin ever plays a relation arsenic well," Liesje Schreinemacher, curate for overseas commercialized and improvement practice of the Netherlands, said past week.

She added that Beijing is "an important commercialized partner."

— CNBC's Silvia Amaro contributed to this report