In mid-February, ASML, a Dutch multinational company that sells microchip manufacturing machinery, revealed that it had suffered a information theft in China. Although it is relatively little known, ASML is a very important company for the global technology sector, because it is the only one capable of producing some of the machinery necessary for the manufacture of the most advanced microchips, those which operate the latest generation computers and smartphones, but even the most sophisticated military equipment. For this reason, it has long been at the center of great ambitions by various countries of the world, and has repeatedly been the victim of attempted thefts of information.
ASML revealed that it had suffered “an unauthorized and misappropriation of data related to proprietary technology by a former employee in China”: it means that a former employee allegedly took advantage of his position to steal some confidential and important data. ASML did not specify when the data theft occurred and did not provide further details.
The Dutch company is a leader in the high-tech sector of so-called lithographic machinery, which allows for the printing of microchip circuits on silicon supports (called “wafers”). ASML has a strong presence in China: Chinese lithographic machinery customers are the third most important market for the company, which employs around 1,500 people in China, including offices, laboratories and factories.
After the breach of its trade secrets, the company has implemented additional countermeasures to strengthen security controls. However, in its annual report, ASML has reassured investors, assuring that the misappropriation of data it would not be overly relevant to your business and indeed forecasted sales for 2023 are expected to grow by 25 percent.
Based on what was reported by anonymous sources heard by Bloomberg, however, the situation would be more serious than admitted. The intellectual property stolen by the former Chinese employee would have been taken from software for internal use by the companya sort of centralized digital library in which the technical information that allows all employees to collaborate in developing ASML products is kept.
It is not clear what type of information has been stolen and for now there are no clues that could point towards an involvement of the Chinese government, but it is possible that these are technologies of a certain importance as implicitly suggested by the ASML itself. In the annual report, the company acknowledges that the theft may have violated some export control regulations, i.e. the bans imposed by the Dutch government on exporting sensitive technology to potentially hostile countries such as China.
Restrictions on exports to China are a sensitive issue. Under U.S. pressure, the Dutch government banned the sale of the most advanced microchip-making machinery to Chinese customers in 2019, and agreed new export restrictions to China with the Biden administration last month.
Although the details have not yet been made public, some observers expect the passage of new bans similar to those passed in the United States, which adopted a package of restrictions in October that severely limits the sale of technologies to China, particularly those necessary to manufacture the most advanced semiconductors suitable for innovative technologies such as artificial intelligence and supercomputers.
At present, China does not have the technological expertise to develop machines similar to those produced by ASML by itself. As Alberto Guidi, a researcher at ISPI says, “no longer having these tools is a further obstacle to the development of the Chinese semiconductor industry”.
This wouldn’t even be the first attempt espionage against ASML, who has previously reported intellectual property theft when another former employee stole information and then shared it with a Chinese company. According to what emerged in the trial relating to the case, an engineer would have copied about 2 million lines of code with which a very important software of the Netherlands company was written.
One of the most important companies in the world
ASML is arguably one of the most indispensable companies to the global economy due to its irreplaceable position in the supply chain of microchips that power a huge range of electronic products ranging from automobiles to military hardware. It alone produces about 90 percent of all the lithography tools used to emboss the circuits on the silicon discs with which the microchips are produced. Above all, however, the company is “an international monopolist in the production of extreme ultraviolet (EUV) lithography machinery, necessary in the etching processes of the most advanced semiconductors”, says Guidi.
After the announcement of the theft, the situation is rather complex. The pressure on ASML to limit its presence in the Chinese market is already very strong but the managing director Peter Wennink is very reluctant to the idea. “If countries and trading blocs each withdraw to their territories, then innovation will be less effective and more expensive,” Wennink said.
ASML’s fear is that an abandonment of the Chinese market would be problematic not only for the company, but also for other countries in the long term. “If you cut out the Chinese with export restrictions, you push them towards technological sovereignty,” Wennink said recently. The result is that “in 15 years they will be able to do everything by themselves”.