Chip provider shares are rising because the US considers easing Chinese language restrictions

An ASML symbol is seen on a circuit board next to the flags of the United States and China in this photo illustration taken in Brussels, Belgium, on January 4, 2024.

Jonathan Raa | Photo only | Getty Images

Shares of major global semiconductor suppliers jumped on Thursday after news that the U.S. is considering sanctions against China's chip industry that fall short of previous proposals.

ASML was around 2.9% higher in European afternoon trading. Tokyo Electron In Japan, where it trades, it closed 6.7% higher.

Bloomberg reported on Wednesday that Washington is considering further measures to restrict sales of semiconductor equipment and AI memory chips to China, but that the new rules could fall short of previous proposals that were seen as stricter.

The U.S. Commerce Department's Bureau of Industry declined to comment on the Bloomberg report.

The USA is now considering putting fewer suppliers to the Chinese technology giant Huawei on an export blacklist called the Entity List. According to the report, a key Chinese company not included, ChangXin Memory Technologies, is a memory company and potential competitor to companies such as SK Hynix and Samsung.

Analysts at Jefferies said ASML had previously expected its revenue in China to fall 30% next year. The exclusion of that company could mean that ASML's sales in China “decline less than expected next year,” Jefferies said on Thursday.

ASML has found itself in the crosshairs of the U.S.-China technology dispute over semiconductors because of the Dutch company's critical position in the chip supply chain.

ASML makes a machine that chip makers need to produce cutting-edge semiconductors. Due to various export controls, these machines have not yet been exported to China. More recently, the Dutch and U.S. governments have introduced restrictions that make it difficult for ASML to export some of its less advanced machinery to China.

The company sells its machines to “fabs,” or factories that actually make chips, such as Taiwan TSMC as well as SMIC in China. Any rules that affect demand or directly target semiconductor manufacturers will have a negative impact on ASML.

The Bloomberg report suggested that further sanctions under consideration would target Chinese companies that make semiconductor manufacturing equipment, rather than the factories that actually make the chips. This is also positive for ASML and other foreign semiconductor suppliers that sell to factories.