ASML shares plunge 5% as China begins making its own chip machines

Shares in ASML, Europe’s most valuable tech company, fell more than 5% on Tuesday after reports that a Chinese rival has started producing machines that could one day compete with its core technology. The Dutch firm is the only company on Earth that mass-produces extreme ultraviolet (EUV) lithography machines, which use ultraviolet light to etch microscopic patterns onto silicon wafers. These machines are essential for making the world’s most advanced computer chips. But reports from The Information and Reuters on Monday and Tuesday said a Chinese state-backed company has begun manufacturing immersion deep-ultraviolet (DUV) lithography machines. DUV machines are less advanced than EUV machines but are still critical for chip production. ASML dominates this market. The news spooked investors. ASML shares dropped nearly 6% on Monday and slid further on Tuesday. Experts caution that China’s machines are still early stage and do not yet match ASML’s technology. The Chinese company plans to build only five DUV machines this year and about 20 next year. By comparison, ASML expects to ship 130 comparable machines this year. Still, the development marks a fresh step in China’s long effort to catch up with the West in chipmaking. Advanced chips are a key bottleneck in the global race to build and deploy artificial intelligence. ASML has been barred by US and Dutch rules from shipping its most advanced EUV machines to China. The company has also been a target of Chinese espionage in the past. The news comes as ASML expands production of its bus-sized EUV machines to meet surging demand. The company’s CFO told reporters this month that the expansion includes plans to supply Elon Musk’s massive Terafab chip project, a $55 billion factory being built by Tesla and SpaceX. ASML did not immediately respond to a request for comment.