China Has Made Its Biggest Breakthrough Yet In Homegrown Chip Manufacturing

China has started mass-producing immersion deep ultraviolet (DUV) lithography machines crucial to manufacturing semiconductors that power the world's most advanced electronic devices. In a bid to reduce its reliance on manufacturers from the U.S. and Europe, China has been developing domestic chip manufacturing in response to restrictions applied by the Dutch government (thanks to pressure from the U.S.) in 2023 and more recently in 2025. U.S. restrictions also led to Nvidia's AI graphics cards being banned in China in 2025.

A little-known Chinese state-owned manufacturer called Shanghai Aishengna Electronic Technology Group has been at the forefront of China's lithography equipment manufacturing. The Chinese government has also channeled talent from other Chinese semiconductor startups into this company as part of talent consolidation efforts. China is making great strides in removing its reliance on machines built by Advanced Semiconductor Materials Lithography (ASML), and plans to build five machines in 2026 and 20 by 2027. ASML is the world's most prolific lithography machine manufacturer, currently enjoying a 90% stranglehold on the world's lithography equipment market.

The company is also the only manufacturer in the world capable of manufacturing extreme ultraviolet (EUV) lithography machines, used to efficiently manufacture chips of seven nanometers or smaller. If further geopolitical factors cause more restrictions, China may have the ability to maintain its supply of chips to advance its technology and protect its tech exports. China is also experimenting with photonic chip manufacturing, which works using light instead of electricity. They're not only better for the environment, but are faster and more powerful than traditional chips. This illustrates that the future of computer chips is doing more than replacing electricity.

For China, achieving complete self-reliance for mature chipmaking is of utmost importance. The U.S.-led restrictions applied by the Dutch government are a key political maneuver that could hurt not only China's technology exports but its war machines as well. In October 2025, the U.S. Select Committee on China revealed that a months-long investigation had highlighted sales of ASML-produced equipment to Chinese companies linked to military development and emphasized the dangers it posed to U.S. national security.

Companies like ASML have so far only been adhering to export regulations, and if the current geopolitical environment continues on its current trajectory, further restrictions could cut Chinese chip manufacturing supply chains off from Western companies like ASML. While China is making strides in manufacturing these lithography machines domestically, there is no indication that the country would pose any immediate risk in capturing market share from ASML. China isn't far behind Western technology, but this Chinese breakthrough could change microprocessors forever.

China has only thus far been able to manufacture DUV machines, which are far less efficient than the EUV machines produced by ASML when it comes to modern standard chipmaking. While DUV machines can produce seven-nanometer chips or smaller, EUV machines can do this much more efficiently. It isn't far from achieving this, however. The country has already succeeded in designing a prototype EUV machine, and if the technology can be applied to mass production, China will have a very real chance at ending ASML's monopoly on the international market.