Key facts
- ASML shares fell significantly after reports of a Chinese competitor's lithography machine development.
- A Chinese state-owned firm, Shanghai Aishengna Electronic Technology Group, is reportedly developing immersion DUV lithography tools.
- ASML dominates the DUV and EUV lithography machine market, with EUV tools being essential for cutting-edge chips.
- China aims to produce a limited number of DUV machines in the near term, far below ASML's output.
- U.S. export controls restrict ASML's sales of advanced equipment to China, potentially driving demand for domestic alternatives.
ASML, Europe's most valuable listed company, saw its shares fall significantly following reports that a Chinese state-owned firm, Shanghai Aishengna Electronic Technology Group, is leading an effort to mass produce immersion deep ultraviolet (DUV) lithography tools. This development highlights the geopolitical pressures on ASML, which is caught between U.S. export controls restricting sales to China and China's drive for technological self-sufficiency in chip production.
ASML's shares dropped nearly 6% on Monday and approximately 10% over two days, wiping more than €60 billion off its market value. While the Chinese-developed DUV machines are in early stages and do not yet match ASML's capabilities, the move signifies China's ambition to reduce reliance on foreign technology. China plans to produce five DUV tools this year and 20 in 2027, a volume far below ASML's shipments. Analysts suggest that U.S. export controls, which prevent ASML from selling its most advanced EUV and best immersion DUV tools in China, may have inadvertently created a market case for Chinese-made lithography equipment.
ASML currently holds a dominant position in the DUV market and is the sole producer of the more advanced EUV machines required for cutting-edge chip fabrication. The company expects around 20% of its revenue, approximately €9 billion, to come from China this year. Some analysts believe the immediate damage to ASML may be limited given its technological lead, but the long-term risk to its China revenue is raised by this development. Chinese chipmakers may opt for domestic, less capable machines if they distrust the long-term availability of foreign technology due to U.S. restrictions.