Shares of Dutch semiconductor equipment giant ASML tumbled more than 7% on Monday after a report revealed that a state-backed Chinese company has begun mass-producing homegrown immersion deep ultraviolet (DUV) lithography machines. The development, first reported by The Information, marks a significant milestone in China’s push to reduce reliance on foreign chipmaking equipment amid tightening export controls.
ASML had initially gained 2% in pre-market trading, buoyed by easing geopolitical tensions and Nvidia’s reported interest in backing a massive AI data center deal. However, optimism evaporated swiftly as investors digested the implications of China’s technological advance. The sell-off spread to other U.S. chip equipment makers: Applied Materials fell around 5%, Lam Research dropped nearly 7%, and KLA Corp slid close to 5%, as the market feared that China’s progress in lithography could eventually localize the broader semiconductor supply chain.
China’s new DUV machines, produced by a Shanghai-based company that assembled teams from state-backed startup Shanghai Yuliangsheng Technology and other firms, are expected to be delivered later this year to leading Chinese chipmakers including SMIC, Hua Hong Semiconductor, and ChangXin Memory Technologies. While production remains modest—with only five units planned for this year and up to 20 in 2027—the breakthrough directly threatens ASML’s last major revenue foothold in China. After U.S. and Dutch export controls blocked EUV sales, Chinese manufacturers stockpiled ASML’s older DUV tools, making China about 14% of ASML’s Q2 net systems sales. A domestic alternative could erode that business.
The timing coincides with the U.S. Congress advancing the MATCH Act, bipartisan legislation aimed at further restricting China’s access to DUV equipment and servicing. If China can produce viable domestic lithography, the effectiveness of such measures may weaken. ASML’s CFO had previously forecast China would account for around 20% of full-year net sales; that projection now faces uncertainty.
Despite the market shock, experts caution that China’s DUV machines still lag behind ASML’s in performance and reliability, and large-scale deployment remains years away. China’s EUV efforts are still in the prototype stage. Nevertheless, the direction is clear—Beijing has prioritized lithography since 2002, and the recent shift to a faster public-private model is showing tangible results, reshaping the competitive landscape in one of the semiconductor industry’s most critical equipment segments.
