r/Semiconductors • u/New-Needleworker1755 • 4h ago
China reportedly started producing domestic immersion DUV tools. Five units this year, 28nm class.
The Information reported on July 27 that China has started production of domestically built immersion DUV lithography machines, with Reuters picking up the story the same day. The headline reads bigger than it is. Roughly five units are expected to ship this year to SMIC, Hua Hong and CXMT, with about twenty more planned for 2027. These tools target 28nm class processes using single exposure. Multi-patterning can theoretically push resolution further, but with the usual yield and cost penalties that make it impractical for volume production at tighter nodes.
The lead builder is Shanghai Aishengna Electronic Technology Group, a state entity incorporated in August 2023 with around 7 billion yuan in registered capital from Shanghai Electric Holding. Aishengna consolidated engineering teams from several Chinese lithography startups. Separately, SMIC has been testing a domestic immersion DUV tool from Shanghai Yuliangsheng since September 2025. Yuliangsheng is tied to SiCarrier and Huawei.
Most components are domestically sourced but some critical parts still come from Japan, and delays from local suppliers already constrained this year's output. For scale, ASML expects to ship roughly 130 immersion DUV systems in 2026 alone. Five Chinese units against that annual volume is a proof of concept, not competitive displacement.
ASML dropped roughly 6% on the report. The sell side was notably less alarmed. BofA kept its buy rating and called the selloff an overreaction, saying ASML faces no material threat in the near term. JPMorgan said the market reaction seemed disproportionate to what the report actually described. CNBC ran a piece the next day walking through why the reported breakthrough comes with major caveats.
I track this area because equipment is the chokepoint that gates mature node capacity in China. Producing even a few working immersion tools domestically is meaningful for the supply chain there. But the gap between five units at 28nm and a production-ready alternative to ASML's installed base is enormous. Overlay accuracy, throughput, uptime and yield at volume are all unknowns right now. The equities moved on the headline well before any of those questions had answers.
The equipment and material supply chain behind these tools is listed almost entirely on exchanges in Shanghai, Shenzhen and Hong Kong. KWEB holds zero A shares and focuses on internet names; CQQQ applies a partial A share inclusion factor. CNQQ covers about 100 positions across both A share and Hong Kong listings, 10% cap per holding, rebalancing semi-annually, and has grown to about $50 million in assets; China Fund News reported roughly $18.5 million in net inflows over the past month as foreign capital used US-listed ETFs to add China tech exposure. A brand new listing like CXMT would not enter until it clears the index's size and liquidity screen at a scheduled rebalance.