Even though China does not have the highest quality chips and the most modern chip machines, the country is on the verge of rivaling the United States in artificial intelligence. “The lag of Chinese technology compared to the best American AI models is no more than six months,” says Eric Schmidt, “and in our world that is a nanosecond.” That’s what the former CEO of Google said last week at an AI conference in Washington DC, organized by SCSP, a think tank that Schmidt himself founded.
Since 2022, the US, in collaboration with the Netherlands and Japan, has imposed restrictions on the export of high-quality technology to China. For example, advanced (chip) machines from ASML and ASMI are not allowed into the country. With less good chips, Chinese software designers are still able to rival American companies such as OpenAI, Gemini and Anthropic. Competition is good, says Schmidt, but he shudders at the thought that AI technology cannot be “controlled” by the United States.
An impressive first AI model from the Chinese start-up DeepSeek caused a shock on the stock exchanges last year. The most recent DeepSeek variant appears to be the same top class like ChatGPT, but cheaper. This model also partly uses Huawei chips. This fits in with China’s policy to become less dependent on Western technology.
Trump’s holes
Despite the nail-biting technology battle, President Donald Trump has largely rolled back the export restrictions on AI chips imposed by his predecessor Joe Biden. He sees AI chips as a commodity, not as a threat to national security. The US government demands 15 percent of every AI chip exported to China and Trump uses access to technology from market leader Nvidia as a bargaining chip in trade negotiations with Xi.
But the Chinese leader has the best cards. The country dominates the global production of rare (earth) metals and other substances that every tech industry needs. Xi does not hesitate to use the Chinese supply chain as an economic weapon, as was evident during the Nexperia crisis. China then limited the export of Nexperia chips in response to the Dutch intervention at the company.
Trump counts his buttons and allows AI chips to go to China again and relaxed the export permits. In response, China hawks in Congress are trying to veto AI chip exports through the AI Overwatch Act. “A simple law that keeps advanced American chips out of the hands of communist spies,” in the words of Brian Mast, the Republican chairman of the House Foreign Affairs Committee.
ASML offside
Another bill, the MATCH Act (Multilateral Alignment of Technology Controls on Hardware), Chinese chipmakers must radically cut back on advanced equipment, including ASML’s lithography systems. China cannot yet make these complex machines itself. The MATCH Act also targets Chinese memory chip manufacturers CXMT and YMTC. That’s ahead of competitors Micron, the American chipmaker that welcomes the bill.
According to the MATCH Act, ASML must stop maintaining chip machines in China. If the Dutch government does not impose this rule itself, the US can enforce it with a unilateral export restriction. Such a blunt instrument of power would put severe pressure on the alliance with the Netherlands.
This is a nightmare scenario for ASML, because the company would then have to give up control of the machines. If the chip machines in China are not (properly) maintained, they will come to a standstill and this would cause global chip shortages. If ASML is sidelined, Chinese companies will put the screwdriver in the machines themselves, and valuable knowledge of the Veldhoven high-tech giant will be lost.
China has a new law that also bans foreign companies from complying with anti-China sanctions. China could impose fines or restrict the supply of rare raw materials to ASML’s suppliers. ASML, which generates almost a third of its turnover from China, is therefore caught between two fires.
The MATCH Act has support from both Democrats and Republicans in the House of Representatives and the Senate, but has not yet been considered. Supporters are considering incorporating the MATCH Act into a defense bill, which would be more difficult for Trump to ignore. Yet it seems unlikely that the American president will act on it, because he does not want to offend China. That would block a favorable trade deal, Trump’s real goal.
Pax Silica
Although the US under Trump is moving away from Europe and has proven to be an unpredictable ally, Trump’s transactional view of AI has worked out relatively well for ASML. Last month, ASML CEO Christophe Fouquet visited Howard Lutnick, the American trade minister. It was a positive conversationwith Lutnick praising ASML’s investments in the US.
The US needs ASML for a new mission. Jacob Helberg, the US Assistant Secretary of State, has asked the EU to participate Pax Silica. This is an alliance with which Washington, together with partner countries, wants to secure the entire supply chain for AI chips and make it less dependent on China. Countries such as Australia, Greece, Japan and Israel signed the Pax Silica agreement in December 2025, but Brussels is holding back.
The Netherlands supports Pax Silica, but has not yet officially signed. The Dutch government would rather not enter into such an alliance without the EU. Without a large European bloc, it is easier for the US to enforce its will – this was already evident in the past when it established export restrictions for ASML.
Helberg was in Brussels last month and immediately dropped by ASML in Veldhoven. The lithography systems needed for advanced AI chips are in short supply because American tech companies are making major investments in new AI data centers. The US cannot do without the European tech sector and ASML to – for a while – lead the way in the AI race with China.
