China DUV machine report weighs on ASML, but analysts see limits
ASML shares fell after a report that China is making DUV chip tools, though analysts told CNBC scale and yield remain major hurdles.
By Theo Nakamura · Staff Writer
· 4 min read
The reported China DUV machine breakthrough put ASML back in focus Tuesday, with the Dutch chip-equipment maker’s shares lower as investors weighed whether China can replace a tool it has long imported. For retail investors, the issue is whether a new domestic Chinese supplier could chip away at ASML’s China sales, or whether the report is more about long-term ambition than near-term competition.
ASML was last down 1.8% Tuesday, CNBC reported, during a broader sell-off in global semiconductor stocks. The stock is still up more than 123% this year, according to CNBC.
The move followed a Monday report from The Information that an unnamed Chinese company has started manufacturing an immersion deep ultraviolet lithography machine, citing people familiar with the matter. The Information reported that the tools are expected to go this year to major Chinese chipmakers including Semiconductor Manufacturing International Corp. and Changxin Memory Technologies, which went public this week.
What is a DUV machine?
A DUV machine is a chipmaking tool that uses deep ultraviolet light to print circuit patterns onto silicon wafers. Wafers are the thin discs of semiconductor material that become chips after many manufacturing steps.
DUV tools are important for producing many chips, but they are used for less-advanced semiconductors than the most cutting-edge devices. Extreme ultraviolet lithography, or EUV, is the more advanced technology used for leading-edge chips such as those designed by Apple and Nvidia, CNBC reported.
ASML dominates both DUV and EUV lithography. That is why a Chinese-made DUV system matters to investors: lithography is one of the hardest parts of semiconductor manufacturing to replicate, and export controls have already limited what ASML can sell into China.
Will China’s DUV machine hurt ASML?
Analysts told CNBC that the report raises a real question, but they do not see an immediate threat to ASML’s position. Stephane Houri, head of equity research at ODDO BHF, told CNBC he would take the development “with a pinch of salt” because China’s tool may be limited to the lower end of the market.
The first test is yield, which means the share of usable chips produced from a manufacturing process. A tool can work in a lab or in limited production and still be unattractive to chipmakers if it produces too many faulty chips.
Nick Patience, AI lead at the Futurum Group, told CNBC that China needs “at least yield parity,” meaning performance close to existing imported tools, rather than only a functioning machine. He said imported DUV machines used by SMIC are still much worse than those used by Taiwan Semiconductor Manufacturing Co., and that reliability takes years of field work.
Scale is the other issue. The Information reported that the Chinese company aims to make five units this year and about 20 in 2027. ASML has said it is planning capacity for around 130 DUV immersion machines in 2026 and expects to add 30% in 2027.
SemiAnalysis analysts told CNBC that tool performance, production scale, fleet performance, the supporting supplier network and economics all weigh against China’s DUV effort. They said scaling production of the machine itself is the most underestimated challenge.
Why ASML’s China exposure is complicated
China made up 14% of ASML’s 6.6 billion euros, or $7.5 billion, of net system sales in the second quarter, CNBC reported. That equals about 924 million euros, or roughly $1 billion.
Still, SemiAnalysis analysts told CNBC that some of the potential displacement may involve revenue ASML has already lost because of export restrictions. The firm said a locally built tool that ASML cannot legally or physically supply does not come out of a sold-out order book.
Paul Triolo, a partner at DGA Albright Stonebridge Group, told CNBC that competing with ASML would require the Chinese company to produce reliable machines in series and support them across many factory environments around the world. Providing a small number of domestic tools is different from supporting a global fleet, he said.
Reuters reported last year that China had completed a working prototype of an EUV machine. Analysts cited by CNBC said progress in DUV does not mean China is close to matching ASML in EUV, a technology SemiAnalysis said took ASML roughly two decades and around $10 billion of research and development and co-investment to make commercially viable.
This story draws on original reporting from CNBC.
