ASML slides as China ramps DUV lithography

A state-backed operation in Shanghai has begun producing domestically developed immersion deep-ultraviolet (DUV) lithography machines, entering a segment long dominated by ASML (ASMLa). Reports indicate the project is targeting roughly five units in 2026 and about 20 units in 2027. The first systems are slated for delivery to Chinese chipmakers including Semiconductor Manufacturing International Corp. (SMIC), Hua Hong Semiconductor and ChangXin Memory Technologies (CXMT). This marks a notable step in China’s effort to build local capability in a key chipmaking technology class.

The Chinese immersion DUV tools arrive against a backdrop of export controls that limit ASML’s ability to sell certain advanced immersion systems into China. Analysts said the new local machines are likely to be deployed mainly at Chinese fabs affected by these restrictions. They also noted that questions remain around the performance, reliability and yield characteristics of the Chinese systems, as well as their ability to scale to higher production volumes.

ASML has outlined plans to maintain and expand its own immersion DUV production. The company expects capacity of around 130 DUV immersion machines in 2026 and is planning to increase immersion capacity by about 30% in 2027. These figures underscore ASML’s scale in the immersion DUV market relative to the small initial volumes targeted in China.

Industry analysts cited in coverage said Chinese-made immersion DUV tools still trail ASML’s equipment on performance and reliability metrics. They also indicated that domestic Chinese production is expected primarily to displace revenue ASML had already forfeited due to export restrictions, rather than immediately threaten its broader global market position. Nonetheless, the emergence of a Chinese alternative adds another variable for ASML in a key geographic market.

The reports on China’s immersion DUV production plans triggered a sharp reaction in ASML’s share price. The stock fell as much as about 8% on Monday and continued to trade lower in subsequent sessions. The move pushed shares to their lowest levels since early June and came amid a wider downturn in semiconductor equities.

Market coverage linked the ASML news to a broader rout in chip and technology stocks. Concerns about AI-related chip spending and rising competition from China contributed to weakness in global semiconductor benchmarks and U.S. technology futures. Major U.S. chipmakers such as AMD, Intel (INTC) and Micron (MU) extended losses over multiple sessions as investors reassessed the sector’s risk profile.

Analysts offered differing perspectives on the fundamental implications of China’s move. Some emphasized that current Chinese tools lag in technology and that the limited volumes projected for 2026 and 2027 imply a gradual impact on global supply dynamics. They highlighted that the primary effect may be to fill demand that ASML cannot meet in China due to export controls.

Bank of America (BAC) reiterated a Buy rating on ASML and maintained a $2,845 price target following the sell-off. It described the market reaction as an over-reaction and argued that an incremental local supply of a limited number of immersion tools would likely have only a modest effect on ASML’s overall sales. The bank estimated that China accounted for roughly 20% of ASML’s group sales and 44% of DUV revenue in 2026, underscoring the country’s ongoing importance to the company even as competitive dynamics evolve.