ASML Plunges Over 8% as China Starts Immersion DUV Lithography Mass Production; Moat May Face Challenges?

TradingKey - ASML ( ASML) shares fell over 8%, briefly hitting their lowest level since early June. As of press time, the stock was still down 5.56% at $1,659.32.

ASML stock price chart, Source: TradingView

According to a report by The Information, state-backed enterprises in Shanghai, China, have initiated mass production of immersion DUV lithography machines, with plans to produce 5 units this year and expand production to 20 units next year. Although mass production is still in its early stages, it has nevertheless triggered market concerns over ASML's monopoly status.

It is reported that DUV is the core workhorse equipment for mature-node chip production and also serves as the bedrock of ASML's business.

Under the US-led export control regime, ASML has been banned from exporting its most advanced EUV lithography machines to China, and sales of its most advanced DUV models to China are also restricted. In the second quarter of this year, the Chinese market remained ASML's third-largest source of revenue, but the equipment delivered by the company to China is up to eight technological generations behind its top-tier models.

If China successfully mass-produces DUV lithography machines, it means long-term demand in this portion of the existing market faces diversion, and ASML's moat is narrowing at the margin.

More importantly, US export controls have not halted the technological catch-up of China's semiconductor industry, but have instead accelerated the formation of an independent supply chain. Judging by the model of integrating R&D teams across enterprises, China's lithography industry is concentrating resources to tackle core equipment. While limited current capacity and the existence of a technological gap are objective realities, the breakthrough in mass production signifies that self-reliance has crossed the most critical threshold. The subsequent pace of ramp-up and iteration will become a core variable shaping the landscape of the global lithography equipment industry.