A Temporary Reprieve for ASML’s China Business

The U.S. government has granted the semiconductor industry a significant breathing space. Following the conclusion of an investigation into China's chip ambitions, Washington has postponed new tariffs on Chinese semiconductors for 18 months, pushing their effective date to mid-2027. This decision provides crucial planning certainty for ASML, whose deep ultraviolet (DUV) lithography systems are in high demand within Chinese fabrication plants.

The Office of the United States Trade Representative (USTR) finalized a Section 301 investigation into China's semiconductor policies. Its conclusion was that Beijing's strategy for dominance in the chip sector harms U.S. trade interests. However, rather than imposing them immediately, the announced tariffs on Chinese legacy chips are now scheduled to take effect on June 23, 2027. The additional duty rate will remain at zero percent until that date.

Market observers link this delay to the "trade truce" established between President Donald Trump and Chinese leader Xi Jinping in October. For ASML, this move temporarily removes a risk factor that could have weighed on the investment plans of Chinese foundries. The Chinese market remains critically important for the Dutch firm, especially for its DUV systems used in less advanced manufacturing nodes.

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Operational Clarity Amidst Long-Term Uncertainty

This 18-month window allows ASML to fulfill existing orders without the immediate threat of new trade barriers. It grants the company room to navigate business despite stricter export controls from both The Hague and Washington. The Dutch government had already restricted sales of advanced immersion DUV systems to Chinese clients back in 2025.

Nevertheless, long-term uncertainties persist. Reports emerged in early December indicating that Chinese manufacturers, supported by former industry engineers, have developed a prototype extreme ultraviolet (EUV) lithography machine in Shenzhen. Mass production is likely still years away, potentially not until 2028 or 2030. This development underscores the steady progress of China's drive for technological self-sufficiency.

Focus Turns to Financial Reporting and Future Risks

Attention in the coming weeks will shift to ASML's fourth-quarter and full-year 2025 results, anticipated in mid-January 2026. Analysts are expected to revise their risk models for the company's China business in light of the deferred tariff threat. The USTR has stated it will announce the precise tariff rates at least 30 days before they take effect in 2027, meaning a final decision is still pending.