China's semiconductor self-reliance accelerates as it begins in-house production of DUV lithography equipment

Global semiconductor equipment stocks fell sharply across the board after reports said that a Chinese state-owned company had begun mass production of deep ultraviolet (DUV) lithography equipment for chip manufacturing.
On the 27th local time, U.S. media reported that a state-owned company based in Shanghai had started producing immersion DUV lithography equipment and had recruited research personnel from other Chinese firms, including Yuliangsheng. Industry sources also said that Xin Kailai, Shanghai Micro Electronics Equipment (Group) Co., Ltd. (SMEE), Huawei, and Tsinghua University were involved in technology development.
ASML shares fell 8.4% on the news. BE Semiconductor dropped 9.9%, Lam Research fell 7.9%, ASM International declined 7.3%, and Applied Materials, Inc. lost 6.7%. Mirae Asset Securities said semiconductor stocks tumbled sharply after reports that China would begin supplying domestically developed DUV lithography equipment to Chinese chipmakers this year.
The Chinese state-owned company is aiming to produce five DUV units this year and 20 next year. Chinese media outlet Sina Finance reported that the equipment produced this year is expected to be delivered to chipmakers such as Hua Hong Semiconductor, Semiconductor Manufacturing International Corporation (SMIC), and ChangXin Memory Technologies (CXMT), which recently went public and became China's most valuable listed company.
ASML delivered 131 immersion DUV systems last year alone, so China's domestic production scale is still very small by comparison. In addition, Chinese-made DUV equipment is still said to lag behind ASML's products in performance and manufacturing quality, and some components reportedly depend on Japanese suppliers.
Even so, the report is being read as a sign that China is making progress toward semiconductor self-reliance despite U.S. export controls. Because of U.S. sanctions on China, ASML has been unable to sell not only its most advanced extreme ultraviolet (EUV) lithography equipment but also its top-tier immersion DUV systems to China. The immersion DUV equipment shipped to China was reportedly as much as eight generations behind the latest models. Even so, China was ASML's third-largest market in the second quarter of last year. Against this backdrop of heavy dependence on foreign suppliers, news of Chinese state-owned mass production of DUV equipment has raised concerns that China is now entering a new phase of self-sufficiency despite U.S. pressure.
[email protected] Hong Chaewan Reporter