Can China catch ASML? Huawei backs startup's DUV push

Huawei is spearheading the localization of China's deep ultraviolet (DUV) lithography equipment, driving the country's push for semiconductor self-sufficiency, the Financial Times reported Tuesday.

According to the report, Huawei is investing across the lithography equipment industry to build a self-sufficient domestic supply chain. At the same time, it is helping Chinese equipment makers secure contracts with the country's major foundries, including Semiconductor Manufacturing International Corp., or SMIC.

Huawei is reportedly giving particularly strong backing to Yuliangsheng, a Chinese semiconductor equipment startup. The Shanghai-based company is said to have co-developed China's first advanced DUV lithography system with Shanghai Micro Electronics Equipment, or SMEE. The ultimate goal for Yuliangsheng and other equipment developers is to produce advanced artificial intelligence chips using China-made DUV lithography tools.

Lithography technology remains the single biggest obstacle to China's drive for semiconductor self-sufficiency. Chinese chipmakers remain heavily dependent on the Netherlands' ASML for the equipment needed to manufacture advanced chips, and domestic core components such as projection lenses and high-power light sources still lag behind foreign counterparts. Compounding the problem, China has been unable to import the most advanced DUV equipment since 2022, in the wake of the US-China trade dispute.

Yuliangsheng is expected to need considerable time before it can compete with ASML on an equal footing, with extensive validation and fine-tuning needed over the long term.

However, if Huawei's support for Chinese equipment makers succeeds, China's semiconductor ambitions would become less vulnerable to Western export controls. Lin Qingyuan, a semiconductor analyst at market research firm Bernstein, said Huawei "is effectively acting as the general contractor overseeing China's DUV localization effort." He added, "Having a DUV prototype alone is not enough. Thousands of suppliers and customers need to work together, and that requires a central coordinating capacity to bring it all together."