France and the Netherlands strike far-reaching new business deal

It’s been a tenet of diplomacy since Machiavelli that leaders do their most crucial work in private while the public are distracted elsewhere. So it was with Emmanuel Macron’s state visit to the Netherlands last week, which finally got down to the lucrative business of “chips” on day two.

By then the French president had been mildly heckled by protesters questioning his democratic mandate for domestic pension reform, added to which he had made a charmingly cackhanded and widely tweeted attempt to speak Dutch after a royal banquet in his honour.

In geopolitical terms he has also maintained his line that France should not get caught up in the latest escalation of tensions between the US and China over Taiwan, compounded by recent Chinese military exercises near the self-governed island.

“Being an ally does not mean being a vassal”, he told reporters in The Hague, echoing his comments following a visit to China just days earlier that Europe should not be a “follower” of either Washington or Beijing. “It doesn’t mean we don’t have the right to think for ourselves.”

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Arguably thinking for themselves as European allies was exactly what France the Netherlands (both founding members of the EU and Nato) were doing when they signed a new Franco-Dutch Pact for Innovation and Sustainable Growth on Wednesday afternoon.

To those familiar with “the new gold rush” in the global marketplace it will come as little surprise that uppermost of the three priorities identified by the pact are semiconductors – the computer chips, traditionally of silicon, crucial for fabricating the electronic circuits that drive modernity.

As it happens the Netherlands, along with Japan, is at the forefront of another tug-of-war between China, which aims to dominate the semiconductor industry in order to enable globally competitive indigenous innovation, and the US, which is spending billions of dollars to safeguard its supplies.

That’s why the Dutch government last month announced new restrictions, to be introduced by the summer, on exports of semiconductor technology in order to “protect its national security”, a move widely interpreted as siding with Washington’s agenda to slow China’s great leap up the value chain.

Although the Dutch did not name China as the trading partner most likely to be hit by the restrictions or name the company most likely to be restricted, it did specify that the controls would apply to the “most advanced” technology capable of producing chips for sophisticated weaponry.

That would include some of the deep ultraviolet (DUV) immersion lithography tools made by ASML, a Dutch company with a global reach across 16 countries including Ireland, Israel, South Korea, Singapore and Taiwan.

ASML says it believes the restrictions will include its Twinscan NXT: 2000i, designed for volume production of 300mm wafers: effectively ultra-thin slices of semiconductor.

Along with semiconductors, the other two key elements of the Franco-Dutch Pact, to be overseen by a public-private steering committee, are no less epochal: quantum technology and energy transition.

Quantum technology is the next step in super-powerful computing which will – once again – revolutionise a range of sectors, from health to defence to generative AI. But that next step will be dependent on parallel advances in semiconductors.

Energy transition and the innovation necessary to support a sustainable planet is dependent on both.

As noted by Le Monde last week, there’s more than a little irony in the fact that this “dynamic” new relationship between Paris and The Hague comes “after the turning point of Brexit” and the need for new alliances spurred by the war in Ukraine.