ASML Stock Plunges as Shanghai Company Begins Domestic DUV Lithography Production

Shares of ASML Holding N.V., which manufactures semiconductor equipment, plummeted over 7% after a Shanghai-based company announced it had started mass production of domestically developed immersion DUV lithography systems. This marks a significant threat to ASML's remaining revenue stream in China, where the company has been selling its previous-generation DUV equipment due to export restrictions on its more advanced EUV technology.

The unidentified Shanghai company aims to produce 5 machines this year, with plans to increase output to 20 by 2027. This advancement puts at risk ASML's significant revenue contribution from China, which accounted for 14% of net systems revenue in the second quarter, down from 19% in the first quarter.

The market also reacted negatively to the news, with American semiconductor equipment manufacturers Applied Materials (AMAT), Lam Research (LRCX), and KLA Corp (KLAC) experiencing declines ranging from 4% to 7%. The decline in ASML's shares was particularly striking given that they had climbed over 2% in pre-market trading on reduced Middle East tensions and reports of Nvidia's potential involvement in a massive OpenAI data center project.

The development highlights the ongoing efforts by China to reduce its dependence on foreign technology, particularly in the area of lithography. The Chinese-manufactured DUV systems remain in preliminary development stages, but the trajectory is unmistakable: Beijing has designated lithography as a strategic national objective and has been accelerating public-private partnership approaches since Washington's tightened export restrictions in 2022.