ASML shares tumble as China reports first mass‑produced immersion DUV tools

Semiconductor capital equipment stocks experienced a sharp downturn following a report that a Shanghai-based, state-backed company has begun mass-producing homegrown immersion deep-ultraviolet lithography machines. The market slide coincided with the U.S. Congress advancing the MATCH Act, which aims to block China from purchasing or servicing DUV machines.

According to The Information, the state-backed company incorporates teams from startups such as Yuliangsheng Technology and intends to produce five DUV tools this year and twenty next year for domestic customers including SMIC, CXMT, and Hua Hong. This development represents a key leap in Beijing's efforts to establish a localized chip supply chain, raising questions about whether upcoming U.S. Restrictions could be neutralized if China builds the tools domestically.

The initial market reaction was swift and synchronized. At their intraday lows, ASML, Applied Materials, Lam Research, and KLA Corp fell roughly 7%, wiping out billions in market value within minutes as investors feared that Chinese engineering had overcome a complex lithography bottleneck and left the broader supply chain vulnerable to replacement.

However, the sell-off slowed as the market entered the final trading hour, with stocks paring back some losses following reassurance from Wall Street analysts who argued the market had conflated a prototype milestone with an immediate commercial threat.

Analyst Didier Scemama characterized the market weakness as an attractive opportunity and maintained a Buy rating and a €2,452 price target. Scemama stated that the threat to ASML is modest, pointing out that China's leading domestic player, SMEE, has yet to demonstrate high-volume production at 28nm or below. He noted that ASML's NXT:1980Fi already delivers 330 wafers per hour, and argued that even modest reductions in scanner performance could materially lower yields and increase cost per die. Scemama calculated that a rollout of 20 domestic tools next year would reduce ASML sales by an estimated €1.4 billion, representing approximately 2.4% of projected group sales.

Analyst Sandeep Deshpande also viewed the market reaction as overblown, emphasizing the distinction between building a prototype and dominating a fab floor. Deshpande noted Producing a handful of immersion DUV tools is not the same as producing tools that can be used for high-volume manufacturing, while stressing that yield, overlay, throughput, and reliability over thousands of wafer runs remain critical. Although he acknowledged long-term risks to ASML's China revenue, he maintained that mid-term earnings remain entirely intact.

Analyst Jakob Bluestone described the development as a small negative for ASML while highlighting a structural reality: global demand for ASML equipment far outstrips available supply. Bluestone noted that DRAM capacity growth in China is projected to add more than 500,000 wafer starts per month before 2030, a scale requiring several hundred ArFi tools. Because ASML cannot supply the entire Chinese market while meeting global demand, Bluestone argued that local Chinese manufacturing of lithography tools is a likely necessity rather than a total replacement for ASML's business.

Away from the semiconductor sector, unrelated market headlines involved French luxury group LVMH. Bernard Arnault, the 77-year-old chairman who has led the €230 billion ($262 billion) company for nearly four decades, used a post on X to reject media reports from Le Monde suggesting a succession battle among his five children. Arnault dismissed the reports as the stuff of novels and emphasized that his family runs houses, builds teams, makes decisions, and calls each other on Sundays. Arnault oversees brands including Louis Vuitton, Dior, and Tiffany, and has not indicated plans to step down or named a successor, though LVMH previously raised the age limit for its chairman and chief executive role to 85.