China’s push for semiconductor self-sufficiency has reached a new phase, one that appears positioned to alter the balance of power in the global battle for AI chip supremacy.
First, evidence has emerged of a Chinese prototype of an extreme ultraviolet (EUV) lithography system, the type of machine previously only built by Dutch company ASML. Additionally, Chinese chips fabrication plants are reportedly upgrading older ASML deep ultraviolet (DUV) machines to keep advanced production lines running under tightening Western export controls.
Until now, Western nations have blocked Chinese access to both the top AI semiconductors and the most advanced equipment for creating leading AI chips. But the recent Chinese advances show significant progress toward its goal of eliminating any need for Western suppliers of AI semiconductors.
Not Yet Fully Functional
Early reports indicate that a government-supported project in Shenzhen produced a working EUV prototype in early 2025. The machine is based on technology from ASML, which has long held a virtual monopoly on building the lithography machines that produce the world’s top chips. Sources familiar with the initiative say the Chinese system can generate EUV light, an important milestone, but has not yet produced functional chips. The machine is said to be enormous, occupying close to a factory floor, and built with help from former ASML engineers recruited into a tightly compartmentalized program.
China’s reported prototype suggests the country may be closer to catching up to ASML than many analysts expected. Even so, the path from prototype that emits EUV to a tool that reliably manufactures high-yield advanced chips is challenging. A major technical hurdle is precision optics, particularly mirror systems built to extreme tolerances, which have historically been supplied by a small number of Western firms. Sources describe China as compensating by scavenging and reverse-engineering components from older equipment acquired through secondary markets, sometimes via intermediaries.
The Chinese government has promoted semiconductor independence as a national priority, and sources characterize the Shenzhen project as part of a coordinated campaign involving research institutes and a network of firms. Huawei, a top Chinese tech company, is described as playing an organizing role across segments of the supply chain, from chip design to manufacturing ecosystems. The U.S. has placed Huawei on the Entity List, which blocks American suppliers from selling high tech gear to listed companies.
Upgrading DUV Machines
The second Chinese effort to boost domestic chip production is incremental but may be more immediately useful. Chinese fabs are reportedly upgrading older ASML DUV machines with enhanced components bought abroad and imported into China.
DUV lithography cannot match EUV’s efficiency at the leading edge, but it can still produce advanced chips if manufacturers rely on multi-patterning, which is a technique of printing layers multiple times to approximate smaller features. That approach is expensive, slows throughput, and can reduce yields. But reports indicate that the resulting upgraded wafer stages, sensors, and optical components can improve alignment precision and performance, easing some of the problems of running advanced nodes on older tools.
Mid Term Horizon: 2028 or 2030
All of this progress presents Western governments with a dilemma that goes beyond business competition into the realm of national security. Restricting access to advanced tools can delay capability, but it also increases the incentive for domestic substitutes and workarounds. If China can turn an EUV prototype into a production-grade system by 2030, a timeline some analysts consider more realistic than an earlier 2028 target, then Chinese AI chip independence looms on the mid-term horizon. Such a development would reshape the strategic assumptions behind export controls, supply-chain alliances, and the technology balance underpinning the AI era.
