China’s DUV breakthrough: Has America’s tech wall outlived its purpose?

(Edited and refined by Grace Chong, with the assistance of AI translation.)

China reportedly began production this week of a domestically developed immersion deep ultraviolet (DUV) lithography machine and is expected to deliver around five of these critical chipmaking tools by the end of the year.

Experts interviewed said that, if confirmed, the development would mark a failure of the US’s years-long “small yard, high fence” strategy in its technology competition with China. It would also represent a landmark breakthrough in China’s efforts to overcome US restrictions on chips and lithography equipment, although the quality of these machines could still take several years to catch up with industry leaders.

US technology publication The Information reported on 27 July, citing two sources, that a state-backed enterprise in Shanghai had begun manufacturing DUV lithography machines. The company has also recruited staff from other Chinese firms, including lithography startup Shanghai Yuliangsheng Technology, to build a research and development team.

It plans to produce around five DUV machines this year and about 20 next year, with deliveries expected before the end of this year to Semiconductor Manufacturing International Corporation (SMIC), Hua Hong Semiconductor and ChangXin Memory Technologies (CXMT). These three major Chinese chipmakers are all subject to varying degrees of US sanctions and export controls.

Because Dutch semiconductor equipment giant ASML has been barred from exporting its most advanced extreme ultraviolet (EUV) lithography machines to China, immersion DUV systems are currently the most advanced lithography tools available to Chinese chipmakers for printing circuit patterns onto silicon wafers. China is also developing a domestic EUV lithography machine, although it remains at the prototype stage.

Reuters reported on 28 July, citing sources, that China had begun producing domestically developed DUV lithography machines. It identified Shanghai Aishengna Electronic Technology Group, a company founded just three years ago, as leading the manufacturing effort after assembling teams from some of China’s leading lithography startups.

According to Tianyancha, a Chinese commercial database, Shanghai Aishengna was established in August 2023 with a registered capital of about 7 billion RMB (US$1 billion). The company focuses on the research, development, manufacturing and sale of semiconductor and specialised electronic equipment. It is backed by two state-owned enterprises, including Shanghai Electric Holding and a subsidiary of Shanghai International Trust.

A milestone in China’s push for self-reliance

Fu Fangjian, an associate professor at the Lee Kong Chian School of Business at Singapore Management University (SMU), told Lianhe Zaobao: “If this report is true, it would certainly represent a landmark breakthrough for China’s technological development and its efforts to overcome US attempts to choke off its technological development.”

Fu said the US intensified its technology restrictions on China during the Joe Biden administration by working with key semiconductor supply chain players, including Japan, Taiwan and the Netherlands, to limit mainland China’s access to advanced technologies. In April this year, the US Congress also advanced the Multilateral Alignment of Technology Controls on Hardware (MATCH) Act, further restricting Beijing’s access to ASML’s DUV lithography machines and related after-sales services.

“China has long understood that it must become self-reliant in this area. The US was never going to ease these restrictions, so China has been preparing for this all along. Producing a domestically developed DUV machine was only a matter of time,” Fu said.

Sources said Aishengna’s DUV machines still require further testing and remain far behind ASML’s systems, meaning they do not yet pose a direct commercial threat. However, investors remain concerned that they could eventually challenge ASML’s position in the Chinese market.

ASML’s shares fell on 27 July to their lowest level since early June, dropping as much as 8.3% at one point.

In a report published on 28 July, JP Morgan analysts noted that producing a small number of DUV lithography machines is fundamentally different from manufacturing them at scale.

“Producing a handful of immersion DUV tools is not the same as producing tools that can be used for high-volume manufacturing, where yield, overlay, throughput and reliability over thousands of wafer runs are what matter,” they wrote.

Fu said that while China is accelerating the production of domestically developed DUV machines, the technology still requires time to mature.

“The newly developed machines will need extensive testing, and their quality will need further refinement. It may take another three or four years before they can come close to matching the quality of ASML’s DUV machines,” he said.

Long road to chip leadership

Tim Zhang, co-founder of Singapore-based consultancy Edge Research, said the China-US technology war has continued for eight or nine years, during which China has made significant progress in rebuilding its semiconductor equipment ecosystem.

“China’s first-generation DUV lithography machine is certainly not yet comparable with ASML’s existing products. But once the initial product is developed, it can be improved through successive iterations. Breaking through the seven-nanometre chip barrier is only a matter of time,” Zhang said.

He believes that if China accelerates the development of domestic alternatives, “given enough time, it could pose a genuine ‘existential threat’ to the US-led semiconductor industry”.

Zhang also argued that the US strategy of containing China’s technological development has lost its effectiveness and effectively collapsed.

“The ‘small yard, high fence’ policy pursued during the Biden administration has fundamentally failed to achieve its intended goals. The US should consider tearing down the fence. Just as the Berlin Wall was eventually dismantled, this wall no longer serves any purpose,” he said.

Despite China’s significant progress in semiconductor hardware, Zhang said it still trails the US in chip computing power. He suggested that China consider importing more advanced US chips with a performance advantage during a two- to three-year transition period to ensure its artificial intelligence models have sufficient computing capacity to support continued iteration and keep pace with advances in US models.

“China needs a balanced approach — it needs to walk on two legs. If everything has to rely solely on domestically produced chips, it is like trying to run on one leg. You simply cannot move fast that way,” he said.

DUV vs EUV

DUV (deep ultraviolet) and EUV (extreme ultraviolet) are the two most important lithography technologies used in semiconductor manufacturing. The key difference between them lies in the wavelengths of their light sources.

DUV is the “mainstay” of the industry’s current manufacturing capacity, while EUV is the “pinnacle” of the industry, breaking through physical limits and reaching the heights of performance.

According to information from ASML’s official website and the Institute of Microelectronics of the Chinese Academy of Sciences, DUV has a wavelength of 193 nanometres. Like a fine pen, it carves circuit patterns through multiple exposures and is used to manufacture mature chips above the seven-nanometre node, including many automotive chips and mobile phone baseband chips.

EUV, by contrast, uses light with a much shorter wavelength of just 13.5 nanometres. Like an ultra-fine needle-tip pen, it can produce far finer patterns, but because EUV light is absorbed by air and most materials, the entire system must operate in a vacuum and use a series of highly reflective mirrors — rather than lenses — to guide and focus the light. It is mainly used to manufacture advanced chips at the five-nanometre, three-nanometre and smaller nodes, including high-end smartphone SoCs (system on a chip) and artificial intelligence chips.

This article was first published in Lianhe Zaobao as “传中国生产国产DUV光刻机 学者：对美科技战“里程碑式突破””.

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