An employee works at a lithography tool for 300mm wafer.
An employee works at a lithography tool for 300mm wafer manufacturing at the new Smart Power Fab of German semiconductor manufacturer Infineon Technologies AG in Dresden, eastern Germany, on June 10, 2026. Jens SCHLÜTER/AFP

KEY POINTS

  • China's Shanghai Aishengna Electronic Technology Group has begun producing domestic immersion DUV lithography machines for major Chinese chipmakers, pressuring semiconductor stocks.
  • While domestic immersion DUV offers Beijing a modest buffer against Western sanctions, mastering DUV does not bridge the decade-long gap to EUV technology required for advanced AI chips.
  • China's lithography progress comes against a history of industrial espionage targeting ASML.

News that China has begun producing homegrown immersion deep ultraviolet (DUV) lithography machines sent ASML Holding NV's (ASML) stock prices tumbling as much as 8% on Monday. The stock prices of the Dutch company's component suppliers also suffered, with BE Semiconductor Industries contracting 8.5%, Soitec dropping 5% and Infineon Technologies declining 3%.

The selloff reflected concerns that ASML's near-monopoly on advanced lithography machines has been undermined by China's state-backed Shanghai Aishengna Electronic Technology Group.

Aishengna's systems are expected to supply Chinese chipmakers such as Semiconductor Manufacturing International Corp. (SMIC), Hua Hong Semiconductor, and ChangXin Memory Technologies (CXMT), as Beijing seeks to build a self-sufficient semiconductor industry that can help it win the global AI race.

Market reaction to China's breakthrough contrasted strongly with the skepticism expressed by industry experts.

"I would take this with a pinch of salt as what [China does] could be limited to the very low end," ODDO BHF's head of equity research Stephane Houri told CNBC.

Immersion DUV tools produce semiconductors that are less advanced than the cutting-edge chips made by companies such as Nvidia to power frontier AI models. Those chips require a more advanced manufacturing process known as extreme ultraviolet (EUV) lithography, a technology over which ASML has maintained a near-monopoly after nearly two decades of research and development.

Another challenge China faces is scale. The Information reported that Aishengna aims to produce five units this year and around 20 in 2027. By contrast, ASML said it plans to produce around 130 DUV immersion machines in 2026 and is planning to add 30% in 2027.

Beijing's homegrown DUV machines could provide a domestic alternative as Western export restrictions tighten, but ASML's dominance over EUV manufacturing remains safe for the time being.As ODDO BHF's Houri put it, "I think EUV is out of reach. Never say never, especially with the Chinese, but it's a completely different technology."

China's step toward domestic lithography manufacturing takes place against a long history of industrial espionage allegations targeting ASML. Bloomberg reported on ASML's successful California lawsuit against a former engineer who stole the company's trade secrets and fled to China, where he secured government subsidies for his own company as well as patents based on the stolen technology. More recently, according to CNN, a second ex-employee in China stole data from ASML's internal Teamcenter repository in early 2023, which houses technical details for its lithography systems.