Netherlands Prime Minister Mark Rutte speaks with U.S. President Joe Biden. The U.S. has been putting pressure on the Netherlands to block exports to China of high-tech semiconductor equipment. The Netherlands is home to ASML, one of the most important companies in the global semiconductor supply chain.
Susan Walsh | AFP | Getty Images
Washington has its eyes on the Netherlands, a small but important European country that could hold the key to China’s future in manufacturing cutting-edge semiconductors.
The Netherlands has a population of just more than 17 million people — but is also home to ASML, a star of the global semiconductor supply chain. It produces a high-tech chipmaking machine that China is keen to have access to.
The U.S. appears to have persuaded the Netherlands to prevent shipments to China for now, but relations look rocky as the Dutch weigh up their economic prospects if they’re cut off from the world’s second-largest economy.
These machines are required to make the most advanced chips in the world, and ASML has a de facto monopoly on them, because it’s the only company in the world to make them.
This makes ASML one of the most important chip companies in the world.
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U.S.-Netherlands talks
U.S. pressure on the Netherlands appears to have begun in 2018 under the administration of former President Donald Trump. According to a Reuters report from 2020, the Dutch government withdrew ASML’s license to export its EUV machines to China after extensive lobbying from the U.S. government.
Under Trump, the U.S. started a trade war with China that morphed into a battle for tech supremacy, with Washington attempting to cut off critical technology supplies to Chinese companies.
President Joe Biden‘s administration has taken the assault on China’s chip industry one step further.
In October, the U.S. Department of Commerce’s Bureau of Industry and Security introduced sweeping rules requiring companies to apply for a license if they want to sell certain advanced computing semiconductors or related manufacturing equipment to China.
Pressure on the Netherlands to fall in line with U.S. rules continues. Alan Estevez, the undersecretary of commerce for industry and security at the U.S. Department of Commerce, and Tarun Chhabra, senior director for technology and national security at the U.S. National Security Council, reportedly spoke with Dutch officials this month.
“Now that the U.S. government has put unilateral end-use controls on U.S. companies, these controls would be futile from their perspective if China could get these machines from ASML or Tokyo Electron (Japan),” Pranay Kotasthane, chairperson of the high-tech geopolitics program at the Takshashila Institution, told CNBC.
“Hence the U.S. government would want to convert these unilateral controls into multilateral ones by getting countries such as the Netherlands, South Korea, and Japan on board.”
The National Security Council declined to comment when contacted by CNBC, while the Department of Commerce did not respond to a request for comment.
A spokesperson for the Netherlands’ Ministry of Foreign Affairs said it does not comment on visits by officials. The ministry did not reply to additional questions from CNBC.
Tensions
Last week, U.S. Secretary of State Antony Blinken hailed the “growing convergence in the approach to the challenges that China poses,” particularly with the European Union.
But the picture from the Netherlands does not appear as rosy.
“Obviously we are weighing our own interests, our national security interest is of utmost importance, obviously we have economic interests as you may understand and the geopolitical factor always plays a role as well,” Liesje Schreinemacher, minister for foreign trade and development cooperation of the Netherlands, said last week.
She added that Beijing is “an important trade partner.”
Microsoft owns lots of Nvidia graphics processing units, but it isn’t using them to develop state-of-the-art artificial intelligence models.
There are good reasons for that position, Mustafa Suleyman, the company’s CEO of AI, told CNBC’s Steve Kovach in an interview on Friday. Waiting to build models that are “three or six months behind” offers several advantages, including lower costs and the ability to concentrate on specific use cases, Suleyman said.
It’s “cheaper to give a specific answer once you’ve waited for the first three or six months for the frontier to go first. We call that off-frontier,” he said. “That’s actually our strategy, is to really play a very tight second, given the capital-intensiveness of these models.”
Suleyman made a name for himself as a co-founder of DeepMind, the AI lab that Google bought in 2014, reportedly for $400 million to $650 million. Suleyman arrived at Microsoft last year alongside other employees of the startup Inflection, where he had been CEO.
More than ever, Microsoft counts on relationships with other companies to grow.
It gets AI models from San Francisco startup OpenAI and supplemental computing power from newly public CoreWeave in New Jersey. Microsoft has repeatedly enriched Bing, Windows and other products with OpenAI’s latest systems for writing human-like language and generating images.
Microsoft’s Copilot will gain “memory” to retain key facts about people who repeatedly use the assistant, Suleyman said Friday at an event in Microsoft’s Redmond, Washington, headquarters to commemorate the company’s 50th birthday. That feature came first to OpenAI’s ChatGPT, which has 500 million weekly users.
Through ChatGPT, people can access top-flight large language models such as the o1 reasoning model that takes time before spitting out an answer. OpenAI introduced that capability in September — only weeks later did Microsoft bring a similar capability called Think Deeper to Copilot.
Microsoft occasionally releases open-source small-language models that can run on PCs. They don’t require powerful server GPUs, making them different from OpenAI’s o1.
OpenAI and Microsoft have held a tight relationship shortly after the startup launched its ChatGPT chatbot in late 2022, effectively kicking off the generative AI race. In total, Microsoft has invested $13.75 billion in the startup, but more recently, fissures in the relationship between the two companies have begun to show.
Microsoft added OpenAI to its list of competitors in July 2024, and OpenAI in January announced that it was working with rival cloud provider Oracle on the $500 billion Stargate project. That came after years of OpenAI exclusively relying on Microsoft’s Azure cloud. Despite OpenAI partnering with Oracle, Microsoft in a blog post announced that the startup had “recently made a new, large Azure commitment.”
“Look, it’s absolutely mission-critical that long-term, we are able to do AI self-sufficiently at Microsoft,” Suleyman said. “At the same time, I think about these things over five and 10 year periods. You know, until 2030 at least, we are deeply partnered with OpenAI, who have [had an] enormously successful relationship for us.
Microsoft is focused on building its own AI internally, but the company is not pushing itself to build the most cutting-edge models, Suleyman said.
“We have an incredibly strong AI team, huge amounts of compute, and it’s very important to us that, you know, maybe we don’t develop the absolute frontier, the best model in the world first,” he said. “That’s very, very expensive to do and unnecessary to cause that duplication.”
President Trump’s new tariffs on goods that the U.S. imports from over 100 countries will have an effect on consumers, former Microsoft CEO Steve Ballmer told CNBC on Friday. Investors will feel the pain, too.
Microsoft’s stock dropped almost 6% in the past two days, as the Nasdaq wrapped up its worst week in five years.
“As a Microsoft shareholder, this kind of thing is not good,” Ballmer said, in an interview with Andrew Ross Sorkin that was tied to Microsoft’s 50th anniversary celebration. “It creates opportunity to be a serious, long-term player.”
Ballmer was sandwiched in between Microsoft co-founder Bill Gates and current CEO Satya Nadella for the interview.
“I took just enough economics in college — that tariffs are actually going to bring some turmoil,” said Ballmer, who was succeeded by Nadella in 2014. Gates, Microsoft’s first CEO, convinced Ballmer to join the company in 1980.
Gates, Ballmer and Nadella attended proceedings at Microsoft’s Redmond, Washington, campus on Friday to celebrate its first half-century.
Between the tariffs and weak quarterly revenue guidance announced in January, Microsoft’s stock is on track for its fifth straight month of declines, which would be the worst stretch since 2009. But the company remains a leader in the PC operating system and productivity software markets, and its partnership with startup OpenAI has led to gains in cloud computing.
“I think that disruption is very hard on people, and so the decision to do something for which disruption was inevitable, that needs a lot of popular support, and nobody could game theorize exactly who is going to do what in response,” Ballmer said, regarding the tariffs. “So, I think citizens really like stability a lot. And I hope people — individuals who will feel this, because people are feeling it, not just the stock market, people are going to feel it.”
Ballmer, who owns the Los Angeles Clippers, is among Microsoft’s biggest fans. He said he’s the company’s largest investor. In 2014, shortly after he bought the basketball team for $2 billion, he held over 333 million shares of the stock, according to a regulatory filing.
“I’m not going to probably have 50 more years on the planet,” he said. “But whatever minutes I have, I’m gonna be a large Microsoft shareholder.” He said there’s a bright future for computing, storage and intelligence. Microsoft launched the first Azure services while Ballmer was CEO.
Earlier this week Bloomberg reported that Microsoft, which pledged to spend $80 billion on AI-enabled data center infrastructure in the current fiscal year, has stopped discussions or pushed back the opening of facilities in the U.S. and abroad.
JPMorgan Chase’s chief economist, Bruce Kasman, said in a Thursday note that the chance of a global recession will be 60% if Trump’s tariffs kick in as described. His previous estimate was 40%.
“Fifty years from now, or 25 years from now, what is the one thing you can be guaranteed of, is the world needs more compute,” Nadella said. “So I want to keep those two thoughts and then take one step at a time, and then whatever are the geopolitical or economic shifts, we’ll adjust to it.”
Gates, who along with co-founder Paul Allen, sought to build a software company rather than sell both software and hardware, said he wasn’t sure what the economic effects of the tariffs will be. Today, most of Microsoft’s revenue comes from software. It also sells Surface PCs and Xbox consoles.
“So far, it’s just on goods, but you know, will it eventually be on services? Who knows?” said Gates, who reportedly donated around $50 million to a nonprofit that supported Democratic nominee Kamala Harris’ losing campaign.
AppLovin CEO Adam Foroughi provided more clarity on the ad-tech company’s late-stage effort to acquire TikTok, calling his offer a “much stronger bid than others” on CNBC’s The Exchange Friday afternoon.
Foroughi said the company is proposing a merger between AppLovin and the entire global business of TikTok, characterizing the deal as a “partnership” where the Chinese could participate in the upside while AppLovin would run the app.
“If you pair our algorithm with the TikTok audience, the expansion on that platform for dollars spent will be through the roof,” Foroughi said.
The news comes as President Trump announced he would extend the deadline a second time for TikTok’s Chinese-owned parent company ByteDance to sell the U.S. subsidiary of TikTok to an American buyer or face an effective ban on U.S. app stores. The new deadline is now in June, which, as Foroughi described, “buys more time to put the pieces together” on AppLovin’s bid.
“The president’s a great dealmaker — we’re proposing, essentially an enhancement to the deal that they’ve been working on, but a bigger version of all the deals contemplated,” he added.
AppLovin faces a crowded field of other interested U.S. backers, including Amazon, Oracle, billionaire Frank McCourt and his Project Liberty consortium, and numerous private equity firms. Some proposals reportedly structure the deal to give a U.S. buyer 50% ownership of the company, rather than a complete acquisition. The Chinese government will still need to approve the deal, and AppLovin’s interest in purchasing TikTok in “all markets outside of China” is “preliminary,” according to an April 3 SEC filing.
Correction: A prior version of this story incorrectly characterized China’s ongoing role in TikTok should AppLovin acquire the app.