Few would expect the future of artificial intelligence (AI) to depend on Eindhoven, a quiet Dutch city. However, just outside it is the headquarters of ASML, the only company that manufactures the machines necessary to produce next-generation AI chips on a large scale. The same ones that allow OpenAI’s ChatGPT and Google’s Gemini to produce instant, human-like responses that have made them so popular.
Extreme ultraviolet (EUV) lithography machines are at the center of a technological cold war. They use extreme ultraviolet light beams to etch circuits thousands of times thinner than a human hair onto silicon wafers, a capability currently monopolized by the West. The smaller the circuits, the more powerful the chips.
Since 2019, the U.S. has blocked the export of EUV machines to China that manufacture the world’s most advanced semiconductors. Restrictions tightened last year with the implementation of the MATCH Act driven by Washington, which, in addition to limiting the marketing of these machines, also prohibits maintenance services for certain equipment installed on Chinese soil.
However, in recent weeks, U.S. Secretary of Commerce Howard Lutnick has plunged ASML into a crisis by expressing concern that one of these machines might have reached the Asian giant, according to The Economist last month.
Impossible, says ASML. Europe’s most valuable company informed U.S. authorities that it knows the exact location of the 340 EUV machines it has manufactured, including 26 that are no longer in service. None are in China, it assures. Moreover, only ASML can transport these highly sensitive machines, which it monitors online, and the components it sends are handled by ASML engineers at its clients’ factories.
So far, Chinese chip manufacturers depend on ASML’s DUV (Deep Ultraviolet) machines, most of them purchased before U.S.-led export controls or second-hand from other countries, to produce the country’s most advanced processors, such as Huawei’s Ascend series. The Chinese chip equipment manufacturer Shanghai Micro Electronics Equipment produces less advanced DUV machines.
But, according to The Economist, the U.S. is concerned about China’s innovative use of DUV technology. Chinese chip companies like Semiconductor Manufacturing International Corporation (SMIC) and Huawei have pushed the technique known as “multipatterning” to the limit, allowing them to use DUV technology to manufacture chips under seven nanometers, practically at the forefront of the sector. Previously, these chips were only made with EUV machines. While this technique involves higher costs and more errors than EUV tools, some U.S. experts believe it could allow China to produce millions of the advanced chips it needs to catch up with the U.S. in the AI supremacy race.
Reuters had already reported in December that a team of former ASML engineers in China had completed a prototype EUV machine in 2025 and was testing it in a high-security laboratory in Shenzhen.
This advance marks the culmination of a six-year government initiative to achieve semiconductor self-sufficiency, one of President Xi Jinping’s top priorities. While China’s semiconductor sector goals have been made public, the Shenzhen EUV project was carried out in secret, according to sources cited by Reuters.
Gregory C. Allen, founder and CEO of Decision Tree Research, an independent research company focused on the geopolitics of strategic technologies based in Washington, notes in a document shared with La Tercera that China’s five-year plan, adopted in October 2020, declared the semiconductor industry an absolute technological priority. Thus, Beijing “would make technological self-sufficiency a strategic pillar of national development.”
As early as 2015, Allen recalls, China announced its semiconductor and manufacturing equipment self-sufficiency goals with its “Made in China 2025” strategy. These goals specifically focused on domestic production of immersion DUV lithography machines before 2025 and domestic production of EUV lithography equipment before 2030.
Thus, the current project fits within the country’s semiconductor strategy, which according to state media is led by Ding Xuexiang, a confidant of Xi Jinping and chairman of the Communist Party’s Central Science and Technology Commission. The Chinese electronics giant Huawei plays a key role coordinating a network of state companies and research institutes across the country, involving thousands of engineers.
Sources cited by Reuters described it as the Chinese version of the Manhattan Project, the U.S. effort to develop the atomic bomb. “The goal is for China to eventually manufacture advanced chips on fully domestically made machines,” they said. “China wants the U.S. to be completely excluded from its supply chains.”
In this context, and marking a key step in Beijing’s initiative to reduce its dependence on foreign technologies, a government-backed company under Xi is said to have started serial production of DUV machines. The news, according to Wired magazine, triggered an immediate market reaction, with a significant drop in ASML shares, the Dutch company that dominates nearly 99% of the market for these essential advanced microprocessor manufacturing machines.
Shanghai Aishengna Electronic Technology Group, a little-known Chinese state-owned company founded in 2023, is leading the production effort after incorporating equipment from leading Chinese lithography startups, a source told Reuters. The company reportedly incorporated work equipment and specialized talent from Shanghai Micro Electronics Equipment, another state firm dedicated to lithography system development and manufacturing, as well as from Shanghai Yuliangsheng Technology, a startup integrated into Huawei’s and SiCarrier’s private ecosystem.
The goal is to manufacture five DUV units this year and increase production to 20 machines by 2027. According to a report by The Information, a technology industry media outlet, the first equipment would be aimed at meeting the demand of Chinese chip and memory manufacturers.
There are few details about the technical characteristics of this equipment. So far, it is known that they are designed to manufacture 28-nanometer (nm) chips, although they could also use advanced multipatterning techniques to produce 7 nm nodes or even smaller. Machines like those SMIC is testing could also be used to produce 5 nm processors with lower performance, but not for more advanced products. In industry jargon, “nanometers” refer to each new generation of chips, not the physical dimensions of a semiconductor.
In contrast, Taiwan Semiconductor Manufacturing Corporation (TSMC), the Taiwanese company responsible for producing nearly 70% of global semiconductors and more than 90% of advanced AI processors, key for companies like Apple and Nvidia, will begin mass production of next-generation 2 nm chips using ASML’s latest EUV equipment by the end of this year.
According to MIT Technology Review in June, the Chinese government officially denied promoting EUV technology development. An editorial in Global Times, a newspaper closely linked to the Chinese Communist Party, dismissed the report, stating that China remained willing to collaborate with the West to gain access to chips. “Our goal has never been to build a self-sufficient and isolated ‘technology island,’” it declared, “but rather to achieve autonomy and control over key technologies to integrate more deeply and equitably into the global innovation network.”
Experts say the reality lies somewhere in between. China undoubtedly longs to be able to manufacture high-end chips. And unlike ASML, it does not need its eventual EUV machinery to be efficient and cost-effective, producing around 200 wafers per hour. Any production would help reduce its dependence on the West.
Christopher K. Tong, a scholar at the University of Maryland, Baltimore County, and an open-source researcher specializing in science and technology analysis, tells La Tercera about China’s latest advances that “its importance lies more in its strategic than commercial aspect.” “The ability to produce DUV technology domestically and bring it to a resolution comparable to EUV gives China a way to mitigate a technological bottleneck it has identified. This would allow it to protect its supply chain to some extent for national security and military reasons,” he explains.
Similarly, Gregory C. Allen tells this outlet that “this is a significant breakthrough, as it represents a long-awaited milestone for the Chinese government. China seeks to localize its semiconductor supply chain, and lithography equipment is a critical and complex input for modern semiconductor manufacturing.” “China is increasing its capacity to produce domestic alternatives to ASML’s older and lower-performance machines, as well as to produce spare parts for ASML machines already in the country,” he adds.
In any case, the CEO of Decision Tree Research highlights that “the Chinese lithography machine is, at best, a replica of a technological achievement reached by European and Japanese companies two decades ago. Moreover, the Chinese machine still depends on foreign components as key inputs.”
Therefore, he emphasizes that “this local machine does not at all change China’s current ability to manufacture advanced semiconductors, as it lacks the adequate performance for that purpose. However, this machine suggests that China will continue making relevant technological advances to reach that goal.”
In that sense, Tong believes it is “important to contextualize this development more broadly. China has a history of acquiring and improving foreign technology, from high-speed trains and electric vehicles to wind turbines and solar panels. However, companies like ASML still consider China an important customer, even now that it has become a competitor.”
Ryan Fedasiuk, a fellow at the American Enterprise Institute and expert on U.S.-China relations, artificial intelligence, and semiconductors, wrote in April that “export controls on lithography have generally been effective in keeping the most advanced machines away from China.” “Currently, the country produces only between 1% and 2% of the capacity of the U.S.-led chip ecosystem, and far less than what Chinese AI labs need to offer their AI models to the global public,” he asserts.
Nevertheless, he believes China “is forging its path toward chip self-sufficiency.” And he warns: “Unless the U.S. takes urgent action to close this gap, China is on track to narrow its gap in logic chip manufacturing at a much faster pace than many policymakers anticipate.”
The Economist points out that one of the pillars of the U.S. response is a new alliance of countries involved in Western AI supply chains. Known as Pax Silica, it seeks to foster collaboration and common regulation in areas ranging from energy and critical minerals to advanced manufacturing and AI models. So far, it has received support from 24 signatories, including the European Union and the Netherlands, which joined in June during the visit of its Minister of Commerce. This could facilitate the exchange of cutting-edge technology among like-minded countries and unify export controls related to EUV systems.
But Tong highlights that “advanced semiconductors are only one component of the AI ecosystem, and AI is only one industry within China’s national technology strategy.” “China’s goal is to achieve full independence in critical infrastructure and advanced technologies. It will continue advancing in this direction until it masters all the critical industries it has identified,” he assures.
Regarding this, MIT Technology Review highlights that the AI race is also driving China to “come up with increasingly ingenious ways to develop machine learning systems that do not rely on the fastest AI chips.” “In the U.S., OpenAI, Anthropic, and Google compete to acquire the largest number of next-generation Nvidia chips. Since China cannot compete that way, it is innovating not in hardware but in software, developing lighter machine learning systems like DeepSeek,” concludes the Massachusetts Institute of Technology magazine.
