China’s chip toolmakers are still a decade away from catching ASML’s EUV machines, UBS reckons.
The investment bank says China is unlikely to match the Dutch lithography giant’s extreme ultraviolet scanners for 10 years. That leaves Beijing stuck with an awkward gap in the machinery needed for the most advanced chips.
EUV lithography is one of the nastier bottlenecks in global chip manufacturing. Without it, making leading-edge silicon becomes complicated, expensive and the sort of job that makes accountants quietly weep.
US restrictions have stopped China’s biggest chipmakers from buying ASML’s EUV kit. UBS thinks China can close the gap on older immersion-based deep ultraviolet lithography much sooner, but EUV is another beast entirely.
UBS says China’s EUV development looks roughly where ASML was in 2004. At that point, ASML was still running functional and vacuum tests to reduce production risks for 45-nanometre chips and more advanced nodes.
The Dutch outfit was wrestling with mirrors capable of handling 13.5-nanometre wavelengths. Since old-school light sources were no good for EUV, ASML had to develop laser and plasma technology, which was not exactly a weekend hobby.
ASML has since moved on to high-NA EUV machines, which use high-NA mirrors and optics for better focus and sharpness. That is a sizeable jump from DUV systems, which first used air and later ultra-pure water in parts of the lithography process.
UBS based its view on patent work and flagged Shanghai Micro Electronics Equipment and startup Shanghai Yuliangsheng Technology as names worth watching. The bank thinks their more immediate threat is in DUV rather than EUV.
China could catch ASML in immersion DUV within two to five years, UBS said. Immersion lithography, or wet lithography, uses ultra-pure water to reduce the effective wavelength of light, thereby improving resolution and depth of focus.
That still does not mean ASML can start flogging its kit on eBay. UBS believes Chinese systems will trail in yield and throughput, keeping local chipmakers reliant on the Dutch supplier for some time.
China remains a fat chunk of ASML’s sales, despite the political aggro. UBS says the country accounted for 33 per cent of ASML’s 2025 sales, up sharply from 10 per cent before 2020.
The bank’s bear case for ASML assumes fresh restrictions on DUV sales to China. Even then, UBS expects China to account for 15 per cent to 20 per cent of ASML’s sales in 2027.
