In Today’s Issue: What sits inside an EUV machine, what China's AI chips are made with instead, how three countries built the machine and then restricted it, why China bought so many of the next-best tool, what China has built itself, and what the forecasts say. The record as of October 9, before ASML's third-quarter results on October 14.

Dear Readers,

In April 2018 China's largest chipmaker, SMIC, ordered an extreme ultraviolet (EUV) lithography machine from the Dutch company ASML for about $150 million. The Dutch government granted the export licence. After at least four rounds of US pressure, including a visit by the US secretary of state to The Hague, the licence expired unused on June 30, 2019 and was never renewed (Reuters, 01/06/2020).

That machine is very important because it is the only practical way to print the finest features of the most advanced chips, and only ASML makes it. Between 2019 and 2025 the company sold 284 EUV systems and says none went to China (ASML investor presentations; ASML via Reuters, 06/19/2026). Beijing has tried. A 2015 state technology roadmap set the goal of domestic EUV production before 2030, and in 2024 China registered the third round of its national chip fund with 344 billion yuan, about $47.5 billion (CSIS, 11/26/2024; Fortune, 05/27/2024).

For AI, chips are the raw material, and controls on chipmaking tools are one of the West's main ways of slowing China down. Yet China's most advanced AI chips are already made without EUV, so the question has a second half:

Why can't China build or buy an EUV machine despite billions in state money and top political priority, how long will that last, and how much does it matter for the AI chips China actually makes today?

All the best,

Kim Isenberg

Lithography is the step in chipmaking that projects a circuit pattern onto a silicon wafer, layer after layer, inside a chip factory, or fab. The shorter the wavelength of the light, the finer the lines. Most chips are printed with deep ultraviolet (DUV) light at 193 nanometres, usually with a film of water between lens and wafer to sharpen the image, a method called immersion. EUV uses light at 13.5 nanometres and prints the finest features in a single exposure. DUV can reach similar dimensions only through multipatterning, extra exposure and etching steps that split one pattern into several; every extra step adds cost, time and chances for defects. Labels such as "7 nm" or "5 nm" name manufacturing generations, not the wavelength of the light.

ASML sold 48 EUV systems in 2025, including four of its newest high-NA tools, a version with larger optics for even finer lines, and booked €11.6 billion in revenue from them (ASML Annual Report 2025). Reuters puts the price at around $250 million per machine (Reuters, 12/17/2025). For 2026 ASML plans capacity for about 65 of its standard EUV tools (ASML, 07/15/2026).