Huawei has taken a central coordinating role in China’s effort to build domestic DUV lithography machines and loosen ASML’s grip.
According to the Financial Times, the Chinese telecoms giant is investing in equipment suppliers and pulling together component makers, fabs and lithography developers as Beijing tries to reduce its dependence on foreign chipmaking technology.
At the centre of the effort is Shanghai-based Yuliangsheng, which is developing advanced deep ultraviolet lithography equipment for Chinese semiconductor manufacturers.
Semiconductor Manufacturing International Corporation (SMIC), China’s largest contract chipmaker, is testing Yuliangsheng’s machines, including on Huawei production lines. The company plans to build 12 machines by the end of 2026. For now, the kit is being used on less demanding chips while engineers work on performance, reliability and throughput. Advanced AI silicon remains the longer-term target.
Bernstein semiconductor analyst Lin Qingyuan described Huawei’s role as effectively being China’s DUV “project manager”, coordinating a supply chain involving thousands of companies and prospective customers.
That is a fairly substantial project plan, particularly when the competition is ASML, whose lithography machines represent decades of accumulated engineering pain and extremely expensive cleverness. US-led export controls have prevented China from buying ASML’s most advanced lithography technology, forcing Chinese chipmakers to squeeze more from older equipment while building domestic alternatives.
Huawei has invested in suppliers working on two particularly awkward parts of the lithography puzzle: projection optics and high-powered light sources. Its investment arm Habo and another Huawei-backed fund have invested in companies including Fujian Zhiqi Photonics and Beijing RSLaser.
For those not in the know, Fujian Zhiqi was spun out of optical materials specialist Castech in 2022 to develop ultra-precision lenses.A Huawei-backed fund paid RMB100 million (€12.8 million), roughly $15 million, for a 37 per cent stake in the company in 2023.
Projection optics remain a significant problem as Yuliangsheng’s machines still use projection lenses made by Germany’s Zeiss. Zeiss told the paper it sells lithography optics only to ASML, but industry sources said second-hand Zeiss lenses are available inside China.
Huawei’s investment in domestic optics suppliers suggests it would rather not rely indefinitely on hunting through the semiconductor equivalent of eBay for crucial components.
Light sources are another headache. Beijing RSLaser has been developing domestic alternatives to the powerful laser systems required for advanced DUV lithography. Yuliangsheng has made enough progress for SMIC to buy and test its equipment, but Chinese lithography remains considerably behind ASML in throughput and production maturity.
SMIC continues to use ASML equipment for key production workloads while evaluating domestic machines.
UBS analyst Francois-Xavier Bouvignies recently estimated that China’s lithography capabilities are roughly comparable with where ASML stood in 2004. Bouvignies expects Chinese immersion DUV equipment could reach mass production within two to five years.
That gap has not stopped Beijing from pouring resources into domestic semiconductor equipment. Export restrictions have made replacing foreign technology a strategic priority rather than an optional industrial policy hobby. The restrictions may even accelerate development by forcing Chinese fabs to put immature domestic equipment onto production floors where manufacturers can discover everything that goes wrong outside the laboratory.
Huawei is well placed to push the process because sanctions have forced it to develop alternative chip supply chains. Its semiconductor designs have moved faster than China’s ability to manufacture them using wholly domestic equipment, leaving lithography as one of the largest remaining bottlenecks.
ASML still has a sizeable Chinese business despite restrictions, with China expected to account for roughly a fifth of its revenue this year. Yuliangsheng, meanwhile, has the less glamorous job of building 12 domestic machines by year-end and persuading Chinese fabs that they are useful for more than engineering tests.
