Analysts express skepticism over China's DUV lithography production, asserting it poses no immediate threat to ASML's market dominance.
Recent reports about China's entry into immersion DUV lithography production have raised skepticism among analysts regarding the actual impact on ASML's market dominance. Despite the initial excitement, experts believe the first machines from China do not pose a significant threat.
Market Reactions
A report from The Information triggered a notable decline in ASML's shares in the U.S., which plummeted by over 8% during the day before closing down 5.8%. This report claimed that a state-owned enterprise in Shanghai has begun producing domestic immersion DUV lithography machines.
According to the report, China aims to manufacture approximately five DUV systems by 2026 and an additional twenty by 2027, with recipients including SMIC, Hua Hong Semiconductor, and ChangXin Memory Technologies. Reuters later confirmed these developments, noting that the project is led by Shanghai Aishengna Electronic Technology Group, in collaboration with various Chinese tech startups.
Challenges Ahead
However, analysts caution that even with the production of these initial machines, there is no indication that they will be ready for continuous commercial use. Paul Triolo from DGA-Albright Stonebridge Group emphasized that achieving stable, year-round operation of immersion DUV systems remains a significant challenge.
William Bevington from Jefferies echoed this sentiment, suggesting that past claims regarding advancements in China's lithography capabilities have often been overstated. He noted that if China had focused on private enterprises instead of state-owned companies, its progress might have been swifter. He also highlighted that Chinese firms still depend heavily on ASML's superior equipment for their semiconductor manufacturing needs.
"China will undoubtedly continue to purchase ASML equipment as long as it remains possible, due to its significantly superior quality," Bevington stated.
Furthermore, analysts suggest that the greater threat to ASML's position may stem from potential U.S. export restrictions. The Match Act, recently approved by the U.S. House Foreign Affairs Committee, seeks to prohibit the sale of immersion DUV systems to certain countries and impose stricter controls on servicing key semiconductor manufacturers.
"If the Match Act were to compel ASML to withdraw its engineers, it would significantly boost the development of Chinese immersion DUV technology," Triolo argued.
Despite these developments, experts believe it is unlikely that China will produce a company comparable to ASML in the near future. Additionally, amid U.S. restrictions, Huawei recently announced plans to produce a new generation of AI chips, while startup DeepSeek is working on developing its own processors.
