A few months ago, I came across an article about Shanghai Micro Electronics Equipment Co., Ltd. (SMEE), one of China’s leading lithography machine manufacturers. SMEE has taken a significant step forward by applying for a patent with the National Intellectual Property Administration for a groundbreaking invention: extreme ultraviolet (EUV) radiation generators and lithography equipment.
This development has the potential to revolutionize the semiconductor industry. EUV technology is crucial for manufacturing advanced chips smaller than 7 nanometers—a domain currently dominated by Dutch firm ASML, which enjoys a global dominance in this field. In 2022, EUV machine exports accounted for 42% of ASML's $24.2 billion revenue.
Presently, ASML, along with Japanese companies Nikon and Canon, controls approximately 99% of China’s lithography machine market. However, U.S. sanctions and export controls have significantly curtailed ASML’s ability to sell advanced equipment to mainland Chinese customers. According to ASML’s 2023 annual report, it could fulfill only 50% of its orders from China that year. Meanwhile, Washington continues to pressure its allies to enforce stricter export controls on semiconductor technologies bound for China.
Despite these hurdles, China’s semiconductor industry has been making remarkable progress. A recent analysis by Japanese engineering firm TechanaLye estimates that China lags behind the industry leader, Taiwan Semiconductor Manufacturing Co. (TSMC), by only three years. However, this estimate appears overly conservative. The report also notes that while U.S. sanctions have caused some delays, they have ultimately acted as a catalyst, driving domestic innovation and production.
Paradoxically, the sanctions intended to slow China’s technological advancement have had the opposite effect, accelerating research and development efforts. History has repeatedly shown that external restrictions often spur innovation—a trend vividly illustrated in the semiconductor industry today.
China’s vast pool of talent and resources positions it as a formidable contender. The successful production of EUV equipment would mark a turning point, challenging ASML’s dominance and reshaping the global semiconductor landscape.
Of course, the critical question now is how swiftly China can implement these advancements and what implications they will have in the technology sector.
As China accelerates its advancements in EUV technology, the global semiconductor industry stands on the brink of transformative change. Whether this marks the dawn of a new era remains to be seen.