The Dutch company ASML makes the machines that create the world's most advanced computer chips. It owns nearly the entire market for extreme ultraviolet (EUV) lithography machines and dominates the older DUV market too. That near-monopoly has made ASML one of the most valuable technology companies in Europe.
But two news reports this week hit the stock hard. Reuters and The Information said a Chinese state-backed company had started building immersion DUV lithography machines. The company chose not to issue a public statement about the news that caused the stock decline.
Immersion DUV machines are not the newest technology - ASML's EUV machines are more advanced. But DUV machines are still used to make a wide range of chips. Losing even a slice of that business would cut into ASML's revenue.
Get the market news that matters in a five-minute read with Market Briefs, our free daily newsletter
The numbers tell the story. ASML's CFO told reporters, "the company is already expanding capacity for its bus-sized EUV machines to meet rising demand - such as fulfilling orders for Elon Musk's ambitious Terafab project, a joint venture between Tesla and SpaceX to construct a $55 billion chip plant."
These developments represent the latest step in China's long-term push to copy ASML's lithography equipment and reduce the technology disparity with the West.
ASML's near-total control of advanced lithography has made it a central pawn in the US-China technology rivalry. Export restrictions imposed by the Dutch government under American pressure have blocked China from buying ASML's most advanced EUV systems and restricted access to some DUV tools. In response, Beijing has poured billions into domestic chip-equipment initiatives, hoping to achieve self-sufficiency.
While immersion DUV machines are less cutting-edge than EUV, they are vital for producing a broad range of semiconductors - from memory chips to processors used in cars and consumer electronics. Even modest Chinese output, if successful, could signal a gradual shift in global supply chains and pressure ASML's margins over time. The company's stock decline reflects investor concern that its monopoly may eventually face real competition, even if the immediate threat remains small.
The Dutch government, under US pressure, has banned ASML from selling its top-tier EUV systems to China since 2019 and further tightened DUV export controls in 2023, accelerating Beijing's push for homegrown alternatives. China has been working on developing its own lithography tools for years, with earlier programs struggling to reach commercial production. The news of operational machines suggests notable progress, though questions remain about quality and yield. ASML's dominance has long seemed unassailable, but these reports hint at a potential crack in that armor.
Join Market Briefs, our free daily newsletter, for a quick daily rundown of the markets
