China Cracks Chip Production Code with Domestic Lithography Machine

China has made significant strides in its pursuit of self-sufficiency in chip production. A state-backed Chinese firm began manufacturing domestically developed immersion deep ultraviolet lithography machines on July 27, a critical tool used to etch patterns onto silicon wafers.

The initial production run is modest, with around five machines expected in 2026 and scaling up to twenty in 2027. For context, ASML is projected to produce approximately 130 DUV immersion units in 2026 alone.

ASML's exposure to this shift is significant, as China accounted for 33% of ASML's total revenue in 2025. The figure was already expected to decline to around 20% in 2026, even before this latest development.