A state-backed company in Shanghai has started mass-producing immersion deep ultraviolet lithography machines, the chipmaking tool that ASML has effectively owned for two decades. The first units are due this year at SMIC, Hua Hong Semiconductor and memory maker ChangXin Memory Technologies, according to The Information, which cited two people familiar with the programme. None of them would name the manufacturer.The timing is what stings. In June, the AI Futures Project put commercial-scale Chinese immersion DUV somewhere in the mid-2030s, with ASML sitting on 98.7% of the market. That forecast is barely a month old. ASML shares fell more than 7% on Monday, the stock's worst day since June 8, and the selling spread down the supply chain: BE Semiconductor dropped about 8.5%, Soitec 5%, Infineon nearly 3%.
Why immersion DUV matters more to China than any other chipmaking tool
Immersion DUV is the ceiling for Chinese fabs. EUV is off the table under export controls, so these machines are the most advanced lithography Chinese chipmakers can legally touch. They print 28nm-class features in a single exposure and can be pushed to 7nm through multipatterning, which costs yield and stacks up overlay errors, but works. SMIC's third-generation 7nm node was built this way.The new systems are mostly domestic, though some critical parts still come from Japan. Development teams were pulled together from several Chinese firms, one of them the state-backed startup Shanghai Yuliangsheng Technology, whose immersion tool SMIC has been testing since September 2025. Supplier delays have capped output this year.
Five machines in 2026, 20 in 2027: what the numbers actually tell you
Volume is the reality check. Roughly five machines this year and about 20 in 2027, against the 130 immersion systems ASML expects to ship in 2026. CFO Roger Dassen told analysts in July that ASML plans to raise immersion capacity by 30% in 2027 and is looking at another 30% for 2028. The domestic tools also trail on performance, reliability and build quality, and qualifying any of them on a live production line can take months.There is a policy angle too. US House Resolution 8170 would name SMIC, Hua Hong, CXMT, Huawei and YMTC as restricted entities in law, cutting them off from ASML sales and servicing. Three of those five are the first customers for the Chinese scanner. The MATCH Act, introduced in April and reported out of committee on 22 April, covers servicing and technical assistance, not just new exports, which would reach the ASML tools already installed inside Chinese fabs.China is separately working on a domestic EUV machine. That one is still a prototype.