Europe's most valuable company faces a new threat after China reportedly took a step toward matching its unique tech that's crucial to the global chip market.
Shares in ASML, the only company on the planet capable of mass-producing the extreme ultraviolet lithography machines used to build cutting-edge chips, slid over 5% in early trading on Tuesday after reports that a Chinese rival had made a breakthrough.
The Information and Reuters reported on Monday and Tuesday that a Chinese state-backed company had begun manufacturing immersion deep-ultraviolet (DUV) lithography machines.
That represents a notable threat to ASML, which dominates the market for DUV machines and has seen a surge in orders in recent months as the AI boom has supercharged demand.
ASML did not immediately respond to a request for comment.
Shares of ASML also closed nearly 6% down on Monday. The DUV machines being built by China are at an early stage and do not yet match ASML's technology, Reuters and The Information both reported, citing sources familiar with the matter.
China reportedly plans to manufacture five DUV machines this year and roughly 20 next year, well behind the 130 comparable machines ASML expects to ship this year.
However, the development is the latest twist in China's yearslong attempt to match ASML's technology and catch up with the West's ability to build advanced chips, which is a critical bottleneck in the race to train and deploy frontier AI models.
The Dutch tech giant has been targeted by Chinese espionage in the past, and ASML has been barred by US and Dutch regulations from shipping its most advanced extreme ultraviolet (EUV) lithography machines — which use ultraviolet light to project microscopic patterns onto wafers — to China.
It comes after ASML announced plans to increase its manufacturing capacity for bus-sized EUV machines to meet surging demand.
The company's CFO told reporters this month that the expanded capacity plans include supply for Elon Musk's Terafab semiconductor moonshot, in which Tesla and SpaceX will join forces to build a massive $55 billion fabrication plant.
ASML's machines are essential if Terafab is to succeed. Business Insider previously reported that Musk took time out of SpaceX's IPO week to beam into an internal ASML meeting last month to pitch employees on the project.
