China’s home-grown DUV progress not the biggest threat to ASML, analysts say
Western anxiety over a potential breakthrough in Chinese chipmaking gear may be rising, but home-grown machines are not the greatest threat facing industry leader ASML, according to analysts.
Intelligence analysis by Llama
Analysts say that while China's progress in making its own immersion deep-ultraviolet (DUV) lithography machines is notable, it is not a significant threat to ASML's dominance in the industry. The proposed Multilateral Alignment of Technology Controls on Hardware Act (Match Act) in the US is a more consequential risk to ASML.
Imagine you're building a really complex machine, like a supercomputer. China is trying to make its own version of this machine, but it's not easy. They're not going to replace the current leader in the industry, ASML, anytime soon. A bigger threat to ASML is a new law in the US that could make it harder for them to do business in China.
Analysis
Western Anxiety Overblown
The recent news of China's progress in making its own immersion deep-ultraviolet (DUV) lithography machines has sparked anxiety in the West. However, analysts say that this anxiety is overblown. The Dutch firm ASML's shares fell more than 8 per cent at one point on Monday in the US before closing down 5.8 per cent, after The Information reported that China had begun manufacturing home-grown immersion DUV machines through a state-backed company in Shanghai.
Not a Significant Threat
While the news is notable, it is not a significant threat to ASML's dominance in the industry. Delivering a domestic machine is not the same as qualifying it for continuous commercial production, said Paul Triolo, partner and technology policy lead at DGA-Albright Stonebridge Group. "Producing machines of the complexity of DUV immersion lithography that are commercially viable and running 24 hours, seven days a week, for an entire year is very difficult," he said.
Previous Reports Proved False
Previous reports of Chinese progress in immersion DUV had proved false, and it remains to be seen whether the latest claims are valid, Jefferies analyst William Beavington said. Domestic capabilities in making such equipment would rise faster if home-grown machines were put into commercial production with major companies like SMIC and CXMT, he said.
A More Consequential Risk
A more consequential risk to ASML is the proposed Multilateral Alignment of Technology Controls on Hardware Act (Match Act) in the US. Approved by the US House Foreign Affairs Committee in April but not yet brought to a full vote, the act would prohibit sales of immersion DUV systems to countries of "concern" and apply tougher restrictions on servicing and technical support at "key semiconductor manufacturing facilities". "If the Match Act forced ASML to pull out its engineers and technicians from China, it would be a significant blow to the company," Beavington said.
Conclusion
In conclusion, while China's progress in making its own immersion DUV machines is notable, it is not a significant threat to ASML's dominance in the industry. The proposed Match Act in the US is a more consequential risk to ASML, and the company's shares are likely to be affected by its passage.
Key points
- China has begun manufacturing home-grown immersion DUV machines through a state-backed company in Shanghai.
- The machines are not commercially viable yet and require significant improvement.
- The proposed Match Act in the US could prohibit sales of immersion DUV systems to countries of "concern" and apply tougher restrictions on servicing and technical support.
- ASML's shares fell more than 8 per cent at one point on Monday in the US before closing down 5.8 per cent.
- Analysts say that while China's progress in making its own immersion DUV machines is notable, it is not a significant threat to ASML's dominance in the industry.
If the Match Act is not passed, ASML's shares are likely to recover, and the company's dominance in the industry will remain intact. Additionally, China's progress in making its own immersion DUV machines could lead to increased competition and innovation in the industry, which could benefit consumers in the long run.
If the Match Act is passed, ASML's shares could plummet, and the company's dominance in the industry could be threatened. Additionally, the restrictions on servicing and technical support could make it harder for ASML to maintain its equipment in China, which could lead to a decline in production and revenue.
