Dutch firm ASML makes one of the most important machines needed to produce the world’s most advanced chips. The U.S. chip restrictions have left companies, including ASML, scrambling to figure out what the rules mean in practice.

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ASMLone of the world’s most critical semiconductor companies said on Wednesday that it recently discovered that a former employee in China had misappropriated data related to its proprietary technology.

The Dutch firm said it did not consider the alleged embezzlement to be material to its business.

“We encountered the unauthorized misappropriation of data related to proprietary technology by (now) former employees in China,” ASML said in its annual report.

“However, as a result of the security incident, some export control regulations may have been breached. ASML has therefore reported the incident to the appropriate authorities.”

The data that has been misappropriated relates to documents. ASML did not disclose details.

The security incident comes at a critical time for ASML and the Dutch government, which are at the center of a battle for technological supremacy between the US and China. Semiconductors are very much a part of this rivalry.

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ASML said the deal could cover its advanced chip-making tools, but it doesn’t expect the measures to materially affect its outlook through 2023.

“We understand that steps have been taken to cover advanced lithography tools as well as other types of equipment. The terms of this agreement have not been publicly disclosed and remain confidential at this time. We expect it will take many months for governments to write and adopt the new rules,” ASML said on Wednesday.

Liesje Schreinemacher, the Netherlands’ minister for foreign trade and development cooperation, said ASML had informed the government of the incident and that an investigation was underway.

“ASML works very hard to ensure the security of its valuable technology. It is in everyone’s interest. It is therefore deeply troubling that such a large, well-known company has become the target of economic espionage,” Schreinemacher said in a statement on Wednesday.

“This shows once again how important it is to protect the Netherlands’ high-value technology.”

China accuses of espionage

The latest report of data misappropriation in China is not the first incident that ASML claims has occurred.

In 2021, ASML alleged that a company called Dongfang Jingyuan Electron was “actively selling products in China that could potentially infringe ASML’s IP rights.”

ASML alleges that Dongfang Jingyuan Electron is related to XTAL Inc., a company against which ASML was awarded trade secret misappropriation damages in 2019 in the U.S.

Donfang Jingyuan Electron has denied reports of intellectual property theft.

ASML said in a separate statement on Wednesday that it has seen an increase in attempts by actors trying to steal its technology.

“Thanks to ASML’s unique position and the rise of geopolitical tensions in the semiconductor industry, we are seeing increasing security risk trends, ranging from ransomware and phishing attacks to attempts to acquire intellectual property or disrupt business continuity,” the spokesperson said.

Meanwhile, China is trying to develop its own semiconductor industry amid rising tensions with the US.

There are no companies in China that can make the tools that ASML does. Without ASML equipment, it will be difficult for China to produce the most advanced chips. Meanwhile, the U.S. imposed sweeping export restrictions in October aimed at preventing China from sourcing or manufacturing key chips and components. Experts previously told CNBC that these factors are likely to hamper China’s drive to develop a domestic chip industry.

CNBC’s Silvia Amaro contributed to this report.

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