ASML CEO reveals China's chipmaking lag
Netherlands, Thursday, 26 December 2024.
ASML CEO Christophe Fouquet recently highlighted a significant gap between China’s semiconductor capabilities and those of global leaders like Intel, TSMC, and Samsung, estimating China is 10 to 15 years behind. This delay is primarily due to the absence of extreme ultraviolet (EUV) lithography tools, which are crucial for advanced chip production. ASML has not supplied these tools to China, adhering to international agreements and U.S. sanctions. Meanwhile, Chinese companies such as SMIC and Huawei are striving to develop their own EUV technology, a process expected to take over a decade. The U.S. government is also pressuring ASML to halt maintenance of advanced deep ultraviolet (DUV) systems in China, though the Dutch government has not complied. As the Western semiconductor industry progresses toward more advanced EUV equipment, China faces challenges in closing this technological gap.
Market implications of technological gap
ASML’s dominant position in the semiconductor industry is reflected in its financial outlook. The company expects sales of 28 billion euros in 2024 [3], with projections reaching 44 billion euros by 2030 [3]. This growth is largely driven by the artificial intelligence boom, with the global AI market expected to expand from $136 billion in 2023 to $827 billion by 2030 [3]. Despite a 7% stock decline in 2024 due to China market concerns [3], ASML maintains its technological edge as the sole supplier of EUV lithography equipment [3].
Chinese market dynamics
ASML faces complex market dynamics in China, where key customers including SMIC, Hua Hong, and YMTC contribute billions in revenue [1]. While Chinese manufacturers are working to replicate ASML’s DUV technology [1], the company’s CEO Christophe Fouquet emphasizes that China will remain 10 to 15 years behind Western capabilities [1]. This gap is particularly significant as SMIC continues producing chips using 7nm-class process technology [1].
Geopolitical pressures and adaptation
The semiconductor industry is navigating intense geopolitical pressures. Companies like ASML are caught between maintaining Chinese market access and complying with Western restrictions [4]. The Biden administration’s investigation into Chinese legacy semiconductors [4] adds another layer of complexity. Industry leaders are adapting to these challenges, with some companies fragmenting their operations to maintain Chinese market presence while complying with U.S. regulations [4].