[DigitalToday reporter Jinju Hong (홍진주)] Tension is growing in the global semiconductor equipment market after a Chinese state-owned company was reported to have started producing immersion deep ultraviolet (DUV) lithography equipment, a key tool for chipmaking. As China pushes to domestically produce DUV lithography tools it has relied on the Netherlands' ASML for, the market is focusing on the possibility of greater self-sufficiency in China's semiconductor supply chain.

On July 28 (local time), online media outlet Gigazine reported that a state-owned company based in Shanghai has begun producing immersion DUV lithography equipment. It is also said to plan to supply the tools to Chinese semiconductor companies including SMIC and CXMT.

The core of the news is that China has moved in earnest to build its own supply chain in the DUV lithography segment, which ASML has effectively dominated. DUV tools are a step below extreme ultraviolet (EUV) lithography equipment used for the most advanced processes, but they are still used as key facilities across a range of processes, including memory and logic semiconductors. With China unable to secure EUV tools due to U.S. and Dutch export restrictions, domestic production of DUV tools is viewed as a realistic alternative for expanding semiconductor production capacity.

Still, actual commercialisation is expected to take considerable time. Chinese semiconductor companies need to verify precision, reliability and compatibility with existing processes before deploying the tools on production lines, and that process is expected to require months of testing or more. Production volumes are also limited. Under the related plan, the target is reported to be about 5 units this year and about 20 units in 2027.

The name of the company that developed the equipment has not been disclosed. People familiar with the information did not identify the company, citing the sensitivity of the project, and the level of readiness for mass production has also not been made public.

The market reaction was immediate. ASML shares fell about 7 percent on the day, and the global semiconductor equipment sector also weakened. Back-end chip equipment maker BESI fell about 8.5 percent, French wafer maker Soitec fell 5 percent and German semiconductor company Infineon fell about 3 percent. Investors were seen as reflecting the possibility that China's equipment self-reliance could affect ASML's dominance in the China market over the long term, rather than any immediate impact on earnings.

However, some in the financial sector also voiced caution that the news did not need to be overinterpreted. JPMorgan said in a report sent to investors that "producing a small number of DUV tools and reliably supplying tools that can be put into mass production are completely different issues." It also said China's annual production target remained very small compared with the 131 units ASML produced in 2025.

EUV lithography tools, which are essential for cutting-edge semiconductor manufacturing, are still monopolised by ASML, and China has been unable to import the equipment due to export restrictions. As a result, China is analysed as pursuing a strategy to expand its semiconductor manufacturing base by starting with domestic production of DUV tools that it can realistically secure.

Separately, there have also been reports that China is developing an EUV lithography prototype with the help of engineers formerly at ASML, but nothing has been officially confirmed yet. The only confirmed points are the start of DUV tool production and a limited initial production plan. The industry sees whether Chinese-made DUV tools can pass performance verification and be applied to production lines at major semiconductor companies such as SMIC and CXMT as an important test for China's semiconductor self-reliance strategy.