Trump’s ASML Squeeze Meets Congressional Override on China Chip Controls
White House pursues contradictory semiconductor strategy as lawmakers demand lithography equipment ban while administration approves advanced AI chip sales to Beijing.
The Trump administration is executing two incompatible semiconductor strategies simultaneously: quietly approving advanced AI chip sales to China while facing mounting Congressional pressure to ban lithography equipment exports that enable Chinese chipmaking—a contradiction that risks undermining both containment and commercial objectives.
The tension crystallised in February 2026 when eight lawmakers sent a letter demanding a blanket country-wide ban on advanced semiconductor manufacturing equipment sales to China, citing ‘critical gaps’ in Export Controls that allow Chinese firms to stockpile production tools. The same month, ASML CEO Christophe Fouquet acknowledged that Chinese demand for the company’s deep ultraviolet (DUV) lithography systems would fall ‘significantly’ in 2026 after a two-year buying surge that saw China account for 36% of ASML’s net system sales in Q4 2025, per NBC News.
The administration approved Nvidia H200 chip sales to China in December 2025 under a 25% revenue-sharing arrangement, effective January 16, 2026—a move former Deputy National Security Advisor Matt Pottinger called a fundamental betrayal of export control logic. Dutch Prime Minister Dick Schoof confirmed in January that Washington was ‘pushing the same way’ as the Biden administration on ASML restrictions, with weekly bilateral discussions on lithography controls, according to TMTPOST.
The DUV Loophole That Scaled Chinese Production
ASML sold 70% of its DUV lithography systems to Chinese entities in 2024, a concentration that gutted the effectiveness of existing export controls, according to analysis by the Center for a New American Security. While Washington banned extreme ultraviolet (EUV) lithography tools capable of producing chips below 7 nanometers, DUV systems remain unrestricted for most Chinese buyers—and SMIC has demonstrated they suffice for advanced node production at scale.
SMIC secured enough ASML DUV equipment to scale production to roughly 70,000 wafers per month, with expansion toward 100,000 wafers per month by end of 2026, per American Affairs Journal. Chinese firms collectively purchased $38 billion in equipment from five top allied semiconductor suppliers in 2024, a 66% increase from 2022. The Bureau of Industry and Security conducted a $1.5 million settlement with a European company in January 2026 for unlawful equipment transfers, while the DOJ announced Operation Gatekeeper disrupted $160 million in AI chip exports in December 2025—enforcement actions that suggest widespread circumvention.
“Critical gaps persist in our export control regime. Once equipment crosses the border into China, the US government has extremely limited ability to enforce end-use and end-user restrictions.”
— Eight US lawmakers, letter to Commerce Secretary
Hua Hong Group is readying 7nm production capacity at its Shanghai facility in March 2026, breaking SMIC’s monopoly on Chinese advanced node manufacturing, according to Oplexa. The development demonstrates that DUV-based production at nodes once thought to require EUV is now viable at commercial scale, enabled by the equipment surge.
Congressional Override and Allied Coordination
The House Foreign Affairs Committee passed the AI OVERWATCH Act on January 22, 2026, granting Congress veto power over AI chip export licenses currently controlled by the Commerce Department. Eight lawmakers sent a letter on February 11 calling for country-wide restrictions on all advanced semiconductor equipment sales to China, not just entity-specific controls that Chinese firms evade through shell companies and front operations, per The Register.
The MATCH Act, introduced in Congress, would ban sales of advanced chipmaking equipment to China entirely. The bill targets not just ASML’s EUV systems—already restricted—but DUV lithography tools, etching equipment, and deposition systems that enable sub-14nm production. Allied suppliers Tokyo Electron (Japan) and Nikon face identical proposed restrictions.
The Netherlands conducts weekly discussions with Washington on ASML export policy, with Prime Minister Schoof confirming alignment on China strategy despite commercial pressure. ASML generated €7 billion in sales from China in the first nine months of 2024, according to ITdaily, making any blanket ban commercially painful. Japan has coordinated similar restrictions on Tokyo Electron and Nikon, though enforcement gaps remain exploitable.
China’s Self-Sufficiency Acceleration
China assembled a functional EUV lithography prototype in Shenzhen by early 2025, with commercial viability estimated between 2028-2030 at earliest. The system remains far from production-ready—ASML CEO Christophe Fouquet stated the EUV ban pushed China’s chip manufacturing capabilities back by 10-15 years—but the prototype’s existence demonstrates that export controls have catalysed rather than stifled domestic research.
Former ASML engineers, including Lin Nan, former head of light source technology, were recruited by Chinese firms with signing bonuses up to 5 million yuan (approximately €700,000) and housing subsidies in 2024-2025, according to IO+. The talent acquisition campaign targets not just ASML but also Applied Materials, Lam Research, and Tokyo Electron alumni, aiming to compress the development timeline for domestically produced lithography and deposition tools.
NVIDIA’s market share in the Chinese AI chip market declined from over 90% to approximately 50% as of early 2026, driven by both export restrictions and the rise of domestic alternatives like Huawei’s Ascend 910C. Huawei is targeting production of 1.6 million Ascend dies, positioning the chip as a direct H100/H200 competitor for Chinese cloud providers and AI labs. China accounts for 15% of global semiconductor production and 6% of the global semiconductor market, compared to a US share of 47% as of 2025, per academic research cited by Taylor & Francis.
What to Watch
Congressional passage of the MATCH Act or AI OVERWATCH Act would force the administration’s hand, ending the dual-track strategy and likely triggering Chinese retaliation on rare earth exports or restrictions on US tech companies operating in China. ASML’s Q1 2026 earnings, expected in April, will reveal whether Chinese buying has collapsed as Fouquet predicted or whether stockpiling continues through third-party channels.
Trump’s reported Beijing visit timing matters—if scheduled before May, expect the administration to resist Congressional override attempts to preserve negotiating leverage. If delayed or cancelled, the White House may pivot to full enforcement of equipment bans to satisfy lawmakers. China’s 15th Five-Year Plan (2026-2030) prioritises semiconductor self-sufficiency; whether Beijing can field commercially viable EUV systems by decade’s end will determine if export controls merely delayed or genuinely constrained Chinese capabilities. Monitor SMIC and Hua Hong capacity announcements—any indication that DUV-based 5nm production is economically viable would render much of the current policy framework obsolete.