CSET researchers: China's SMEE has only a 4% market share in older-generation chip lithography, far below ASML and Nikon, a “chokepoint” for China's chip plans
Context & Ripple Effects
China's semiconductor push has long had an equipment constraint: prior coverage placed SMEE at 90nm production while SMIC pursued more advanced nodes, and reports on SMIC's 7nm effort stressed the production limits imposed by missing EUV tools.
The gap is broader than lithography alone. Chinese EDA suppliers had less than 2% global share in 2023, underscoring that domestic chip autonomy depends on multiple specialized tool layers rather than foundry capacity by itself.
First-order effects
- SMEE's reported 4% share in older-generation lithography leaves Chinese chipmakers dependent on ASML and Nikon even for equipment below the leading edge.
- The finding identifies lithography as a near-term bottleneck for China's domestic-equipment push: SMEE must improve adoption and competitiveness, not merely demonstrate machines.
Second-order effects
- Efforts to require more domestically made equipment in new Chinese capacity additions could confront a practical supply-and-performance constraint in lithography, potentially slowing substitution or concentrating demand on the few viable foreign suppliers.
- ASML and Nikon retain leverage in an equipment segment China seeks to localize; scrutiny of access can intensify, following concerns that ASML IP theft allegations could lead to tighter controls.
Third-order effects
- If domestic lithography capability remains behind, China’s semiconductor strategy is likely to be shaped by a persistent equipment-capacity lag: advances at chipmakers will remain coupled to access to foreign tools and their servicing.
- The case points to a longer transition from dependence on single best-in-class suppliers toward building second sources across the toolchain, though achieving meaningful redundancy will require progress in adjacent areas such as EDA as well.
The trend: China’s chip self-sufficiency drive is increasingly defined by whether it can create credible domestic second sources for specialized manufacturing equipment, not just expand fabrication capacity.