China’s domestic DUV lithography threat prompts rethink of ASML’s monopoly edge

China’s progress in developing domestic immersion DUV lithography machines signals a potential challenge to ASML’s longstanding dominance in critical semiconductor manufacturing equipment, prompting industry reassessment of its strategic moat.

ASML has spent years building one of Europe’s most valuable industrial franchises by mastering a field so technically demanding that few rivals could even approach it. That advantage still stands, but it is no longer being treated as untouchable. Reuters reported in late July that China had started producing domestic immersion deep ultraviolet, or DUV, lithography machines, prompting investors to reconsider how long ASML’s edge can remain as wide as it has been. The Financial Times later described the shift as a reminder that even a formidable monopoly can begin to look vulnerable once a competitor shows meaningful progress.

The Dutch group does not make chips. It sells the lithography systems that project circuit patterns on to silicon wafers, a step that sits at the centre of modern semiconductor manufacturing. That position has turned ASML into a strategic supplier for the global chip industry and one of Europe’s most valuable listed companies. Tom’s Hardware reported that ASML generated €32.7 billion in revenue in 2025, shipped 48 EUV systems and delivered 131 immersion DUV tools, underlining how large the business remains even as competition intensifies.

The most important moat remains extreme ultraviolet, or EUV, lithography. EUV uses a 13.5-nanometre wavelength and is required for some of the most advanced chip features. ASML is the only commercial supplier of those production systems. The company has said it has never shipped an EUV machine to China. That has not stopped speculation. TechCrunch reported in June that the US Commerce Secretary raised concerns that one of ASML’s top-end EUV tools may have reached China, but ASML denied that any EUV machines or related components had been sent there.

China’s progress is more immediate in DUV, where the equipment is still vital for many layers of chip production and where some exports to China require Dutch licences. According to reports from Tom’s Hardware and The Information, Shanghai Aishengna Electronic Technology Group, backed by state capital in Shanghai, has drawn on capabilities from Chinese groups including Yuliangsheng and SMEE and has begun mass production of domestic immersion DUV machines. The initial customers are expected to include SMIC, Hua Hong and CXMT, though the early volumes are small. Capital Economics has estimated only about five deliveries in 2026 and 20 in 2027.

Even so, the scale gap remains large. Reuters said China’s new machines still need more testing and lag ASML’s tools on performance and reliability, the qualities that matter most in high-volume manufacturing. ASML shipped 131 immersion DUV systems in 2025, far more than China’s planned early output, showing how far the domestic effort still has to go before it can challenge the Dutch supplier in a meaningful commercial way. At the same time, ASML is not standing still. Tom’s Hardware reported that its roadmap moves towards High-NA EUV and eventually Hyper-NA systems, while the company plans to expand capacity in both EUV and immersion DUV by about 30% by 2027. For now, ASML remains dominant. What has changed is the assumption that its position is beyond erosion.