China Starts Mass Production of Homegrown Immersion DUV Lithography Tools in Break for Chip Self-Reliance

SHANGHAI — A state-backed manufacturer in Shanghai has quietly begun mass-producing immersion deep ultraviolet lithography machines and plans to deliver the first units this year to SMIC, Hua Hong Semiconductor, and memory maker ChangXin Memory Technologies, according to The Information, citing two people familiar with the program. The development marks the first time a Chinese entity has reached volume output on the class of scanner that prints the most advanced logic and memory chips outside of extreme ultraviolet.

The Numbers Behind the Breakthrough

Output targets are modest by global standards but symbolically potent: roughly five machines in 2026 and about 20 in 2027. All three named recipients sit on the list of Chinese firms that a bill now moving through Congress would cut off from ASML sales and servicing by statute. U.S. House Resolution 8170, known as the MATCH Act, designates SMIC, Hua Hong, CXMT, Huawei, and YMTC as restricted entities in law. Three of those five are the named first customers for the domestic scanner.

The MATCH Act, introduced in April, was reported out of the House Foreign Affairs Committee on April 22 and has a Senate companion filed as S. 4281. Its immersion DUV provisions cover servicing and technical assistance, not just new exports, which extends its scope to installed tools already operating in Chinese fabs — fabs that have spent the past two years squeezing more life out of ASML's older DUV machines through secondary-channel upgrades.

The Information didn't name the manufacturer, but its sources described the operation as having pulled DUV development teams from several Chinese companies, one of them the state-backed startup Shanghai Yuliangsheng Technology. SMIC has been testing a Yuliangsheng immersion tool since September 2025. Most components in the new systems are domestic, though some critical parts still come from Japan, and delays at local suppliers have held back output this year.

ASML's Dominance and the Gap That Remains

ASML expects to ship about 130 immersion systems in 2026, matching 2025, CFO Roger Dassen told analysts during the company's July earnings call. Dassen added that ASML intends to increase capacity by 30 percent in 2027 for immersion, and is investigating another 30 percent for 2028. China accounts for around 20 percent of ASML's net sales this year, down from 33 percent in 2025, driven mainly by mainstream logic demand.

Immersion DUV prints 28-nanometer-class features in a single exposure and reaches 7 nanometers through multipatterning, at a cost in overlay errors and yield. ASML chief executive Christophe Fouquet told the same call that rising DRAM lithography intensity partly reflects customers replacing multipatterning with cheaper single-exposure EUV.

Independent analysis from the AI Futures Project in June put commercial-scale Chinese immersion DUV in the mid-2030s, with ASML holding 98.7 percent of the immersion market. Qualifying the new machines for production lines could take many months, and they trail ASML's tools on performance and build quality. China's domestic EUV effort, which Reuters first reported as a working prototype in December, remains years away.

What This Means for the Supply Chain

The domestic scanner does not need to match ASML's flagship Twinscan NXT:2000i to be strategically useful. It needs to be good enough to keep mature-node production running — 28-nanometer and above — if ASML servicing is cut off. That tier covers the vast majority of automotive, industrial, and legacy logic chips that Chinese fabs already make in volume. SMIC, Hua Hong, and CXMT together operate more than a dozen 12-inch fabs on mature nodes. A domestic scanner that can maintain those lines removes a critical choke point.

Japanese suppliers still provide some critical components, including specialized lenses and photomask blanks. That dependency narrows but does not eliminate the control of export controls. Japan's Ministry of Economy, Trade and Industry has aligned its restrictions with the U.S. on advanced semiconductor equipment, though immersion DUV has not been explicitly listed in the same way EUV has.

The timeline also matters. Five machines this year is a pilot run. Twenty next year would start to look like a production ramp. If the program holds that pace, Chinese fabs could have a credible domestic alternative for immersion DUV servicing by the end of the decade, right as the MATCH Act's servicing provisions would bite.

The Geopolitical Context

Washington's calculus has been that cutting off ASML servicing would freeze Chinese advanced-node expansion within months. The domestic scanner complicates that math. It doesn't eliminate the gap — ASML's tools still lead on overlay accuracy, throughput, and uptime — but it creates a floor. Chinese fabs would degrade rather than halt.

For ASML, the risk is twofold. Lost Chinese revenue is already priced in; the company guided for China's share to normalize around 20 percent. The larger danger is that a credible domestic competitor emerges in the immersion DUV segment, the way Chinese firms have done in etching, deposition, and inspection. ASML's 98.7 percent market share leaves almost no room for a second supplier, but it also means any erosion is pure loss.

Industry Reaction and Technical Reality

Analysts tracking the equipment sector say the Chinese tools will face a long qualification cycle. A fab typically spends six to twelve months qualifying a new scanner before committing production wafers. Overlay accuracy, focus stability, and defect density must all meet process windows that ASML has refined over decades. The domestic machines are unlikely to match those specifications out of the gate.

Still, the fact that mass production has started at all shifts the baseline. Previous Chinese lithography efforts — notably SMEE's earlier dry DUV tools — never reached volume manufacturing on immersion. The jump to immersion, with its water layer between lens and wafer, is a major engineering step. It requires precision fluid handling, vibration isolation, and thermal management that dry tools do not.

For now, the breakthrough is real but narrow. Mass production has started. First deliveries are scheduled. The machines will be installed, qualified, and put to work on mature-node wafers. Whether they can scale to the volumes and reliability that modern fabs demand is the question the next two years will answer.

Sources: The Information via Tom's Hardware, ASML Q2 2026 earnings call transcript

Internal links: Semiconductors, AI

Keywords: China, immersion DUV, lithography, SMIC, Hua Hong, CXMT, ASML, MATCH Act, semiconductor equipment, chip self-reliance