Major drama on Wall Street: has China really replicated ASML's money-printing machine?
The market came under pressure after a Financial Times report that China has begun mass-producing domestically made DUV machines, a category ASML has dominated for years.
On the surface, this sounds like an earthquake.
But in practice, the picture is much more complex.
We obtained the original report and read the fine print.
According to the report, the Chinese company has succeeded in achieving serial production of DUV machines, with most components manufactured in China and only some critical components still coming from Japan.
This is significant progress for Beijing in its goal to break free from dependence on the West and build an independent supply chain for the chip industry.
But here comes the part the market is likely ignoring.
According to sources familiar with the matter, the Chinese machines are still inferior to ASML machines in both performance and production quality.
The transition to real production lines is expected to take many months, and perhaps even longer, as customers will examine precision, reliability, and compatibility with other equipment in factories.
In addition, production itself is not yet smooth.
Although most components are local, delays at Chinese suppliers have already slowed the pace of production this year.
This means ASML currently faces no immediate threat.
The real threat is long-term.
If China continues to improve its domestic machines, and simultaneously the United States and Europe continue to tighten export restrictions, Chinese chip manufacturers may prefer local equipment even if it is inferior, simply because they will have no alternative.
This is precisely the Chinese strategy:
Not to defeat ASML overnight, but to gradually build an independent industry that will reduce dependence on the West.
Therefore, the sharp declines currently seen across the entire chip sector appear mostly as an emotional reaction to the headline.
The report is certainly significant and indicates that China is progressing faster than many estimated, but it also clarifies that the technological gap with ASML still exists, and it will take a long time until Chinese machines become a real alternative.
The market loves to panic over headlines...
Only then does it start to read the fine print.
For comparison, ASML delivered no less than 131 DUV machines last year!
China will need to work a full year in 2027 to produce what ASML produces in a few weeks.
The headline from The Information that speaks of 'mass production' is proving to be more clickbait than reality on the ground.