What just happened? China has long sought to lessen its reliance on foreign chipmakers and focus on its home-grown options, part of the Made in China 2025 plan to update its domestic manufacturing capabilities. But those ambitions could be scuppered by the US, which wants to ban the sale of lithography tools produced by Netherlands-based ASML to the country.

ASML, the world's largest supplier of lithography machines used in the chipmaking process, is already prohibited from selling its most advanced extreme ultraviolet (EUV) lithography equipment, which costs about $164 million per unit, to its Chinese customers as it cannot obtain an export license from the Dutch government due to pressure from the United States.

Bloomberg writes that the US government is now pushing ASML to also stop selling its older deep ultraviolet (DUV) lithography tools to Chinese clients. Despite being a generation old, the technology is still used to create chips found in phones, autonomous cars, PCs, robots, and more. The US wants to ban the sale of the most advanced type of DUV technology, immersion lithography machines, to China. ASML is the main player in this field; it had a 95% market share when it came to sales of immersion lithography systems last year.

As noted by The Reg, while DUV systems are mostly used for older manufacturing processes like 30nm, multi-patterning techniques can be used to make denser nodes. TSMC, for example, uses DUV for the first two generations of its 7nm nodes.

The US is also trying to pressure Japanese companies such as Nikon to stop selling the same DUV tools to China, which has already seen several domestic companies banned from buying advanced chipmaking equipment from US firms.

If the US does get its way, ASML's bottom line could take a big hit. Chinese chipmakers accounted for 14.7 percent of ASML sales last year. To give you an idea of figures, SMIC, China's largest chipmaker, plans to invest $11 billion in growing its DUV capacity by 2023.

"The discussion is not new. No decisions have been made and we do not want to speculate or comment on rumors," an ASML spokeswoman said.

Last month, Chen Wenling, chief economist at the government-run China Center for International Economic Exchanges, called for China to seize Taiwan's TSMC "if the US and the West impose destructive sanctions on China like sanctions against Russia."