The EU is reportedly negotiating a sanction swap with Beijing that would lift Chinese restrictions on German ASML supplier Sindlhauser Materials, to keep the China-dependent company from being hit.

The EU is in talks with China to lift restrictions Beijing imposed on Sindlhauser Materials GmbH, a German company in ASML's supply chain. The sanctions risk putting the company out of business. In return, the EU would remove restrictions it placed on one unnamed Chinese firm accused of aiding Russia in its war with Ukraine, according to an Oct. 14 Bloomberg report citing people familiar with the matter.

The deal was discussed during EU Commissioner for Trade and Economic Security Maroš Šefčovič's visit to Beijing. The EU is expected to make the first move, and any delisting on its side would require unanimous support from member states. Both sides also agreed to share more information and give advance warning before introducing future export restrictions.

In July 2026, China added Sindlhauser, a German precision-manufacturing and advanced-coatings firm, to its export-control list, along with 13 other European companies. The move appeared to be retaliation for the EU's 21st Russia sanctions package, which targeted several Chinese firms accused of supplying Moscow with components that can be used to make weapons. Beijing's official reason was the firms' alleged dealings with Taiwan.

China's choice of Sindlhauser does not appear to be random. According to Bloomberg, officials believe Beijing has spent the past year and a half gathering information on Western supply chains and used that data to identify the relatively obscure German firm as a pressure point on ASML, the world's most important chipmaking-equipment company.

Sindlhauser relies almost entirely on Chinese rare earths and critical minerals, so the restrictions cut off its main source of inputs. The measures bar Chinese exporters from selling dual-use items to the firm. They also prohibit foreign companies and individuals from passing China-origin dual-use items to Sindlhauser, which prevents the company from simply sourcing the same materials through a third-party distributor.

The listing initially sparked panic over the company's survival. The German federal government and the state government of Bavaria stepped in, helping the company explore workarounds such as alternative suppliers and recycling existing materials. However, because of its heavy dependence on China, Sindlhauser now faces the risk of going out of business in the coming months if the sanctions remain.

EU officials in Brussels had been raising the case with Beijing for weeks, culminating in the delisting swap discussed during Šefčovič's visit. The episode highlights China's influence over several parts of the global technology supply chain, including semiconductor manufacturing, which is critical to the AI boom. China has also placed export restrictions on several rare earth metals, limiting their availability across the supply chain. Meanwhile, Western governments have been investing heavily in domestic supply chains to reduce their reliance on China.