Tech • AI • Robotics • Game
China Takes On Europe’s Last Technology Monopoly
9.2/10TL;DR
China has not broken ASML’s EUV monopoly, but its progress in domestic DUV lithography and tightening export controls could erode a market that still represents about 20% of the Dutch group’s revenue.
KEY POINTS
A market panic triggered by a narrow announcement
Reports that China had unveiled five domestic lithography machines wiped more than €60 billion from ASML’s market value in two trading sessions. The reaction came just days after the company had raised its annual revenue outlook to €43 billion to €45 billion and outlined plans to expand production capacity by 30% in 2027, with a further possible 30% increase in 2028.
The key confusion: EUV is not DUV
The announcement concerned immersion DUV machines, not EUV systems. That distinction matters because ASML remains the world’s only company able to manufacture EUV lithography machines at industrial scale, and no such system has been shipped to China since an export license lapsed in 2019. In DUV, by contrast, ASML holds roughly 80% market share but faces competition, notably from Nikon.
Why DUV still matters enormously
DUV may be older than EUV, but it remains essential across the semiconductor industry. It is used for chips in cars, telecom equipment and consumer devices, and it still plays a role in many manufacturing steps even for advanced semiconductors. That is also the product line ASML has continued to sell into China, making it strategically more exposed there than headlines suggested.
The Chinese effort is state-backed and consolidated
The company at the center of the announcement, Shanghai AEnya Electronic Technology Group, was created in August 2023 with about 7 billion yuan in capital, roughly $1 billion. Its shareholders are public entities linked to Shanghai, and its teams appear to draw on talent from SMEE, the long-standing Chinese lithography player, and other semiconductor equipment groups tied to the domestic supply chain. Rather than a sudden breakthrough by an unknown startup, the project looks like a state-led consolidation of expertise built over years.
What the machines are supposed to do
The company plans to produce about five machines in 2026 and around 20 in 2027, with initial customers including SMIC and memory maker CXMT. On paper, the systems target 28-nanometer production in a single exposure and could reach 7 nm or even 5 nm through multipatterning, a slower and more expensive method that requires repeated passes. That approach is already used by SMIC to produce 7 nm chips for Huawei without EUV tools.
A real industrial step, but not yet a full rival
Building a functional immersion DUV machine is a major technical achievement achieved by only a handful of countries. But a usable prototype is not the same as an industrial fleet. Earlier Chinese platforms were associated with throughput of about 150 wafers per hour, versus at least 310 for ASML’s NXT:2000i class tools, and the bigger unknowns are uptime, defect rates, maintenance and long-run yield.
ASML’s strength is scale and consistency
In chipmaking, success depends not only on printing a wafer once, but on repeating the result thousands of times a day across multiple machines over years. A modern chip involves around 100 layers that must align with near-perfect precision. ASML’s advantage lies in delivering fleets of machines consistent enough for fabs to switch production between them without meaningful quality drift, a capability that newcomers have yet to demonstrate.
Export controls may be creating a captive market
Before tighter controls, Chinese fabs had little reason to buy slower, less proven domestic equipment if they could order from ASML. That changed after the Netherlands tightened licensing rules on advanced DUV exports from September 2023, with further restrictions later under strong pressure from Washington. For Chinese customers, the choice is increasingly between local tools and no new tools at all, giving domestic suppliers the commercial base they previously lacked.
The next front is servicing existing machines
A proposed US measure, the MATCH Act, would push allies including the Netherlands and Japan toward tighter controls not only on equipment sales but also on servicing. That category includes installation, calibration, repairs, software and firmware updates, diagnostics, training and process support. If such restrictions were applied and licenses denied, the installed base of Western machines in Chinese fabs would gradually lose one of its biggest advantages: full manufacturer support.
The strategic risk goes beyond today’s machines
China has also been reported to have built an early EUV prototype in Shenzhen capable of generating EUV light, though not yet of producing functional chips. The timeline often cited for domestic EUV chipmaking ranges from 2028 to 2030. For now, ASML’s monopoly in commercial EUV remains intact, but the broader strategic contest is whether sanctions delay China enough to preserve a Western lead, even as they help incubate a future competitor.
CONCLUSION
ASML has not lost its EUV monopoly, and five Chinese DUV machines do not by themselves remake the lithography market. The deeper issue is that export restrictions may accelerate China’s ability to replace Western equipment at home by making domestic alternatives the safest long-term option.
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