ASML shares decline amid proposed US export restrictions on fragile China market

ASML shares declined on Tuesday following last week's proposal by US legislators for stricter measures to limit China's access to chipmaking equipment, potentially affecting the Dutch company's sensitive sales in the region.

ASML shares in the Netherlands saw a decrease of roughly 2.6% as of 6:11am ET.

Last Thursday, lawmakers from both parties introduced the Multilateral Alignment of Technology Controls on Hardware (MATCH) Act, aiming to restrict China from key chipmaking resources and addressing the nation's major semiconductor entities.

"The U.S. has introduced widespread export restrictions to curb China's development of its semiconductor sector, yet US allies have not entirely aligned with these policies. This lack of synchronization has allowed China to take advantage of crucial loopholes," stated Rep. Michael Baumgartner's office, who championed the bill, in a press release dated April 2.

Over recent years, the US has put several semiconductor trade restrictions on China.

This primarily targets cutting-edge semiconductor technologies. ASML manufactures extreme ultraviolet (EUV) lithography machinery necessary for creating the most sophisticated chips available.

ASML has not shipped any of these machines to China.

The company also produces a deep ultraviolet (DUV) lithography machine. DUV machines, while less advanced, are used in producing other semiconductor types like memory chips, utilised in devices from laptops to smartphones.

Several of ASML's DUV devices have been subject to Dutch export permissions.

If enacted, the MATCH Act would prohibit the export of even ASML's DUV machines, crucial for less advanced semiconductor production, which China’s largest chip firms have been acquiring.

In January, ASML projected China to represent about 20% of its total sales for this year, down from 33% in 2025. This was prior to the newly suggested US restrictions.

Should these limitations be enforced, they might further challenge the Dutch company’s declining Chinese sales.

If a comprehensive DUV embargo occurs, it could "generate some variability" in ASML's financial performance, "possibly increasing short-term orders (pre-implementation of restrictions) yet affecting mid-term outcomes," Houri explained.

"The stock market's reaction suggests proposals from US Congress could notably influence ASML," Ben Barringer, head of technology research at Quilter Cheviot, shared with CNBC.

Barringer and Houri pointed out these proposals remain at an early stage and would have to navigate the American legislative process.