China Unlikely to Match ASML’s Top Tool in Next Decade, UBS Says

China is unlikely to advance its semiconductor manufacturing capabilities fast enough to develop a viable alternative to ASML Holding NV’s cutting-edge extreme ultraviolet technology within the next decade, UBS Group AG analysts predict.

“They seem to be at a similar stage to ASML in 2004,” UBS analysts led by Francois-Xavier Bouvignies wrote in a note.

Beijing has been investing state capital into the domestic chip industry to become self sufficient. Its progress has been stymied by Washington-led restrictions on exports of cutting-edge chip-making equipment.

Veldhoven, Netherlands-based ASML is the only maker of sophisticated lithography machines that are crucial for manufacturing advanced semiconductors, including for Nvidia Corp. The chip-equipment giant is banned from selling its extreme ultraviolet lithography tools to China, which is among its top markets.

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UBS analysts cited patent activity, particularly around light source and laser subsystems, as showing maturity comparable to ASML 15 years before it began mass producing its EUV tools.

“Given likely gaps in yield and throughput versus ASML, along with regulatory constraints, we see it as unlikely that Chinese lithography tools will be deployed outside China,” they said.

Still, UBS expects China to develop the capability for high-volume manufacturing of immersion deep ultraviolet lithography machines within two to five years. While less advanced than EUV systems, immersion DUV machines are still essential to chipmaking, using light to print intricate circuit patterns onto silicon wafers.

ASML prices its immersion DUV machines at close to $90 million compared with the advanced EUV gear that costs more than $200 million apiece.

An ASML spokesperson did not respond to a request for comment. Its shares traded flat in Amsterdam on Tuesday.