ASML's stock dropped by 6.5% following a report indicating that China has begun the mass production of DUV lithography equipment.
TL;DR: ASML's stock dropped 6.5% following a report from The Information that a company in Shanghai has started mass-producing DUV lithography tools. China's share of ASML’s sales decreased to 14% in Q2, down from 19% in Q1.
ASML shares in Amsterdam fell by as much as 6.5% on Monday after The Information reported that a Shanghai firm is now mass-producing immersion deep ultraviolet lithography tools. These are the kinds of machines ASML is prohibited from selling to China due to Dutch and US export controls. If the report holds true, it signifies precisely what the controls were meant to prevent: China developing domestic capabilities due to the inability to source them internationally.
ASML did not provide an immediate comment regarding the news. The share of China's contribution to ASML's net system sales declined to 14% in the second quarter, down from 19% in the first quarter. This decrease is indicative of tightening export restrictions and the potential that Chinese chipmakers are exploring alternative suppliers. Earlier this year, China was ASML's largest market, but the relationship has been deteriorating each quarter as the Dutch government, influenced by US interests, limits shipments of its NXT:2050i and NXT:2100i systems.
While DUV lithography is not considered cutting-edge by ASML's standards, as the company’s most advanced tools utilize extreme ultraviolet (EUV) technology—which China cannot replicate and has never been able to purchase—DUV machines can produce chips for the majority of electronics, ranging from vehicles to smartphones and AI inference accelerators. A domestic Chinese capability in DUV would weaken the commercial rationale for ASML's sales in China without bridging the technological divide at the forefront.
The US aims to completely restrict China's access to chip equipment, and the MATCH Act would compel the Netherlands and Japan to align their DUV restrictions with US regulations within 150 days. If China can now manufacture its own DUV tools, the leverage from these restrictions diminishes. ASML's stock performance reflects a market reassessing the risk to its revenue from China—not from regulatory actions, but from competition. The export controls were intended to slow China's progress, but they may have inadvertently motivated it to accelerate its development.
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ASML's stock dropped by 6.5% following a report indicating that China has begun the mass production of DUV lithography equipment.
A company based in Shanghai has commenced the production of immersion DUV lithography machines, according to The Information. ASML's stock declined by 6.5%. China's contribution to ASML's sales decreased to 14%.