Chip Equipment Makers Slide After U.S. House Panel’s Explosive Report Reveals Allied Firms Bolstered China’s Chip Industry

ASML Holding NV shares tumbled in Europe after a months-long bipartisan investigation by the U.S. House Select Committee on the Chinese Communist Party (CCP), led by Chairman John Moolenaar (R-MI) and Ranking Member Raja Krishnamoorthi (D-IL), published new findings on Tuesday afternoon showing that American, Dutch, and Japanese semiconductor equipment firms have bolstered China’s chipmaking capacity, including through sales to Chinese state-owned and military-linked entities.

ASML and other semiconductor equipment makers, including Tokyo Electron Ltd, Applied Materials Inc., KLA Corp., and Lam Research Corp, “made sizeable returns selling equipment to Chinese state-owned and military-linked companies,” according to the Select Committee on China. 

The CCP is using technology developed by the US and its western allies to build the chips that power its military, surveillance, and AI-driven authoritarianism.

We must not allow this critical equipment to go to our foremost adversary, or we could lose the technology arms race.

— Select Committee on China (@committeeonccp) October 7, 2025

Here are the key findings from the report:

• Massive Exposure to China: In 2024, Chinese buyers made up 44% of Tokyo Electron’s revenue, 42% for Lam Research, 41% for KLA, and 36% for both ASML and Applied Materials.

• Sales to High-Risk Customers: The companies sold tools to five entities already flagged by the U.S. government for ties to China’s military and intelligence services, including Huawei affiliates.

• Rapid Revenue Growth From China State-Owned Enterprises: Sales to Chinese state-owned enterprises surged from $9.5 billion in 2022 (11% of total revenue) to $26.2 billion in 2024 (27% of total revenue and 69% of China-based revenue).

• Exploiting Loopholes: As the U.S. tightened export rules, Dutch and Japanese firms ramped up shipments of slightly less advanced lithography systems to China, suggesting CCP stockpiling below restriction thresholds.

Chairman Moolenaar stated that China is “growing its profits at the expense of U.S. national security“, adding, “We must not allow this critical equipment to be handed over to our foremost adversary, or America could lose the technology arms race.” 

National Security Concerns:

• Military: Chips are powering the PLA’s AI-driven “intelligentized” warfare systems.

• Trade: China seeks vertical integration to evade future export restrictions.

• Economic Security: Dominance in legacy and advanced chipmaking could give Beijing global leverage.

• Human Rights: AI and high-performance computing bolster China’s domestic surveillance and global digital authoritarianism.

“It makes little sense to sell the CCP the chips they need to modernize their military and violate human rights. But it makes even less sense to sell them the machines and tools they need to produce those chips themselves. This bipartisan investigation reveals that the scale of these sales by Dutch, Japanese, and American firms is even more vast than we realized. Alongside our allies, we need to protect our national security and ensure we remain the world’s leading innovators in SME,” said Ranking Member Krishnamoorthi.

The investigation concludes: 

“The ability to design and produce semiconductors lies at the heart of the technology competition with China, and SME represents a crucial chokepoint that the U.S. and our allies currently have over China. As the U.S. government works with our allies and partners and plots the course ahead on export-control policy and related actions, this crucial chokepoint must be preserved, not squandered. The U.S. and allies only have the ability to export-control SME because we collectively are the world’s leading innovators in SME. We must double down on our success.”

Shares of ASML, Tokyo Electron, KLA, Applied Materials, and Lam Research all tumbled on their respective exchanges after the Select Committee on China released its report late Tuesday afternoon.

We doubt the Trump administration will launch a major crackdown on these semiconductor equipment makers just yet, given that President Trump and Chinese President Xi Jinping are scheduled to meet later this month in South Korea. The last thing Washington needs is added turmoil in Sino-US relations before the continuation of in-person trade talks, primarily as Trump officials work to secure a deal and move things forward.

*   *   * 

Read the U.S. House Select Committee on the Chinese Communist Party’s (CCP) new report: