China has crossed a milestone that many in the semiconductor industry once viewed as years away. A Chinese state-backed company has begun mass producing homegrown immersion deep ultraviolet (DUV) lithography machines, marking the country’s first commercial manufacturing effort for one of the most advanced and tightly controlled pieces of chipmaking equipment.

The move gives Chinese chipmakers their strongest domestic alternative yet to Western lithography systems and marks another step in Beijing’s campaign to reduce reliance on foreign technology after years of export restrictions from the United States and its allies.

The development was first reported by The Information, which said the Shanghai-based manufacturer has already started production and expects to deliver its first systems to leading domestic chipmakers later this year.

China enters one of the toughest segments of semiconductor manufacturing

For decades, lithography has remained one of the biggest barriers separating China from the world’s leading semiconductor manufacturers.

These machines print microscopic circuit patterns onto silicon wafers, forming the foundation of every modern processor and memory chip. Producing them requires extraordinary engineering across optics, precision mechanics, laser systems, software, vibration control, and manufacturing accuracy.

Until now, that market has been dominated by Dutch chip equipment giant ASML.

Inside China’s First Homegrown Immersion DUV Lithography Machines to Challenge Western chip dominance

China’s new immersion DUV platform does not match ASML’s latest systems. It is still viewed as a generation behind in throughput, overlay precision, and long-term reliability. Yet reaching commercial production is a milestone on its own.

“A Chinese state-backed company has begun manufacturing one of the key pieces of equipment used in chip manufacturing for the first time, a key development in Beijing’s drive to reduce its reliance on foreign technology to make chips. The Shanghai-based company is making immersion deep ultraviolet lithography machines, a key type of equipment used by chipmakers,” The Information reported.

Industry reports identify the manufacturer as Shanghai Yuliangsheng Technology, a startup linked to Huawei and semiconductor equipment company SiCarrier.

Its immersion DUV system has reportedly been undergoing evaluation at Semiconductor Manufacturing International Corp. (SMIC) since September 2025.

The machine targets 28-nanometer manufacturing using single exposure. Through multiple patterning techniques, engineers believe it can support production at 7-nanometer nodes and potentially 5-nanometer chips, though yields remain below those achieved using the industry’s most advanced equipment.

Most of the machine’s components are sourced domestically, with only a limited number of imported parts still required.

Initial production will remain modest. Roughly five systems are expected to ship during 2026 before output increases to around twenty machines in 2027.

Early customers are expected to include SMIC, Hua Hong Semiconductor, and ChangXin Memory Technologies (CXMT), three companies that sit at the center of China’s semiconductor manufacturing ambitions.

Export controls changed China’s priorities

The timing is no coincidence.

U.S. export restrictions, combined with Dutch licensing controls, have prevented China from purchasing ASML’s most advanced extreme ultraviolet (EUV) lithography systems.

Those restrictions turned immersion DUV technology into China’s most practical path for manufacturing advanced chips at scale.

Beijing has invested tens of billions of dollars across its domestic semiconductor supply chain over the past several years. Lithography remained one of the hardest pieces to replace.

Commercial production suggests those investments are beginning to translate into real manufacturing capability rather than laboratory prototypes.

Wall Street reacts

Investors quickly recognized the significance of the announcement.

Shares of ASML fell between 4.6% and roughly 7% during trading following the report. U.S. semiconductor equipment companies, including Applied Materials, Lam Research, and KLA, posted declines as investors weighed what a domestic Chinese alternative could mean over the long term.

The selloff does not suggest investors believe ASML’s leadership is ending.

The Dutch company remains the only manufacturer capable of supplying commercial EUV lithography systems and still leads the industry in advanced immersion technology.

China has represented a meaningful portion of ASML’s recent DUV business after domestic chipmakers accelerated purchases ahead of tighter export controls. A successful local supplier could gradually reduce that dependence.

The road ahead remains difficult

China’s first production machines still face significant hurdles before they become fixtures inside high-volume fabrication plants.

Engineers must prove the systems can deliver consistent yields, maintain uptime over extended production runs, and meet the demanding precision required by modern semiconductor manufacturing.

Industry observers expect qualification testing to continue through the coming months, with broader deployment inside Chinese fabs potentially beginning in 2027.

China is pursuing its own EUV lithography platform, though industry analysts widely believe commercial availability remains years away.

A strategic shift, not a finished race

China has not closed the technology gap with Western semiconductor equipment makers.

ASML still holds a commanding lead across advanced immersion systems and retains an exclusive position in EUV lithography.

What changed this week is the stage of China’s semiconductor program.

The country has moved beyond building prototypes and into manufacturing commercial lithography systems that domestic chipmakers can begin evaluating inside real production lines.

That transition matters. A viable domestic supplier gives Chinese foundries another option if export restrictions tighten further, covering service contracts, spare parts, or future equipment sales.

The first generation of these machines will not reshape the semiconductor industry overnight. They do signal that one of the most difficult gaps in China’s chip supply chain is beginning to narrow, one production system at a time.