As semiconductor giants, including Intel, TSMC and Samsung, have been competing fiercely in the Angstrom era for advanced nodes, the progress on their adoption of ASML’s High-NA EUV (high-numerical aperture extreme ultraviolet) equipment has been brought back into spotlight lately. However, the semiconductor market, which seems to get more polarized in the meantime, may rely more on China than most people have imagined.

ASML: China is Ten Years behind the U.S. regarding Cutting-edge Chips

In May, without the assistance for extreme ultraviolet (EUV) lithography machines manufactured by ASML, China’s largest foundry, SMIC, is rumored to produce 5nm chips for Huawei this year. However, ASML’s CEO has denied the possibility that China would be able to replicate EUV technology.

According to an interview by Germany media Handelsblatt in July, ASML CEO Christophe Fouquet stated that the EUV technology, which the Dutch semiconductor heavyweight boasts of, is highly complex. Wccftech, citing Fouquet’s remarks in the interview, noted that it would be extremely difficult for China to replicate because the country lacks the know-how.

Citing Fouquet, the reports noted that regarding the development of cutting-edge chips, China is about ten years behind the U.S.

The World in Dire Need of the Legacy Chips Produced by China

However, Fouquet argued that chip buyers, including those in the German automotive industry, are in need of older generation computer chips, an area in which Chinese chipmakers are currently increasing their investments.

His remarks highlight the importance of China’s semiconductor production for global markets, which may still thrive under U.S. export restrictions.

According to the reports, Fouquet stated that though global demand for the legacy chips have been soaring dramatically, Europe cannot even meet half of its own needs. As manufacturing these chips is not very profitable, Western firms are not investing enough in the sector, Fouquet said.

Therefore, neither did he agree with the extensive, tightening chip controls recently. Fouquet noted that it doesn’t make sense to prevent someone from producing something you need.

Peter Wennink, former CEO of ASML, stated in July that the chip war between China and the US lacks factual basis and is entirely driven by ideology. Wennink also anticipated that this chip war will not be resolved anytime soon and could potentially persist for decades.

China Contributes up to 50% Revenue of the World’s Top 5 Chip Equipment Makers

Take a look at the latest financial results of the world’s top semiconductor equipment manufacturers, and we may find where the strong momentum of China has led to.

ASML, as the world’s exclusive EUV provider, reported second-quarter earnings and sales (USD 6.8 billion) that beat forecasts, as AI chips drives up demand for the Dutch firm’s critical semiconductor making equipment.

More importantly, regarding ASML’s sales in lithography units in the second quarter of 2024, China emerged as the largest market, as it contributed 49% of the revenue, higher than South Korea’s 28% and Taiwan’s 11%.

It is worth noting that a year ago, in the second quarter of 2023, China only accounted for 24% of ASML’s sales in lithography units, while Taiwan and South Korea contributed 34% and 27%, respectively. The results, in a way, have reflected China’s ambition and importance in chip making, as Fouquet noted.

Despite export controls, China has also become the largest market by region for U.S. semiconductor equipment giant, Applied Materials. In the second quarter, China accounted for 43% of its total sales of Applied Materials, a 22 percentage point increase YoY, while Taiwan and South Korea contributed 15% and 15%, respectively.

The dominance of the Chinese market is also evident with other major semiconductor equipment makers. China contributed 39% of Lam Research’s revenue in the June quarter, 2024, much higher than 26% a year ago.

Tokyo Electron, on the other hand, attributed as high as 49.9% revenue to China for the first quarter of its 2025 fiscal year, compared with 39.3% a year ago. China accounted for 44% of KLA’s revenue in the June quarter, 2024.

As DUV systems, which have not been extensively regulated, can still be applied to nodes down to 7nm, or even 5nm, Chinese chipmakers, with the support of government, may continue to hold a significant position in the global semiconductor ecosystem.

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The World Integrated Circuit Association (WICA) recently released its 2023 ranking of the top 100 cities in the global semiconductor industry. According to the list, the U.S. and China each have 26 cities represented, leading the rankings. South Korea, Japan, and Taiwan have 9, 9, and 5 cities listed, respectively.

Notably, Shanghai and Beijing have secured spots in the top ten, ranked fifth and ninth globally, highlighting China’s growing potential and prominence in the semiconductor industry.

In the WICA’s recently released “2023 Global Semiconductor Industry Comprehensive Competitiveness Top 100 Cities White Paper” (referred to as the white paper), the top five cities are identified as Santa Clara, Hsinchu, Seoul, San Jose, and Shanghai.

The white paper highlights that China has the largest semiconductor application market in the world, with a complete industry chain. The design and manufacturing sectors are at a mid-level globally, with a significant number of design companies and substantial growth. Additionally, China’s packaging and testing technologies have reached the forefront globally.

Reportedly, China’s semiconductor industry is poised for continued robust growth, driven by expanding demands in automotive electronics, the Internet of Things (IoT), industrial control, and new energy, supported by favorable policies and financial resources.

As per the white paper, Shanghai is home to several semiconductor giants, such as SMIC, Hua Hong Semiconductor, Unisoc, and AMEC, serving as a major hub for China’s semiconductor industry. In recent years, Shanghai’s semiconductor sector has reportedly sustained its growth, developing a complete industry chain from design and manufacturing to packaging and testing.

The white paper further notes that Beijing also hosts numerous key semiconductor companies, including Tsinghua Unigroup, SMIC, Naura, and GigaDevice. The city has gradually become a core area in the global semiconductor industry, with a well-developed industry chain covering design, manufacturing, and packaging/testing, forming a relatively complete industrial ecosystem.

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(Photo credit: SMIC)

According to a report from South Korean media outlet BusinessKorea citing sources, Samsung Electronics is said to be planning to reduce its procurement of ASML’s next-generation Extreme Ultraviolet (EUV) lithography equipment. Additionally, their joint plan to build a research and development center in South Korea may also in limbo.

Reportedly, Samsung Electronics initially planned to purchase more than three units of the next versions, EXE:5200, EXE:5400, and EXE:5600, over the next ten years. However, the company has now decided to introduce only the EXE:5200 and will reconsider the introduction of subsequent versions in the future.

This decision came after Vice Chairman Jun Young-hyun was appointed as the new head of the DS (Device Solutions) division and reviewed ongoing projects and investments.

Samsung and ASML’s strategic partnership originated from a visit in December last year, when President Yoon Suk Yeol led a delegation to ASML’s headquarters in the Netherlands. The delegation included representatives from South Korean semiconductor giants Samsung and SK hynix, according to the Korea Times.

During the visit, Samsung and ASML signed an MOU, agreeing to jointly invest approximately KRW 1 trillion (about USD 7.6 billion) to establish a research fab in South Korea.

However, with Samsung’s decision to reduce equipment introduction, the related process has been completely halted. It remains to be seen whether the joint research center will be established in another location or if the project itself will be canceled, pending future discussions.

Kyung Kye-hyun, who was the head of the DS division at the time and is now leading the Future Business Planning Team and SAIT (Samsung Advanced Institute of Technology), emphasized the importance of establishing a cooperative relationship through joint research for High NA EUV.

He noted that Samsung now has a technical priority for “High NA EUV” and mentioned that the company believes it has created an opportunity to utilize High NA EUV effectively in DRAM or logic semiconductors in the long term.

Despite the revised plans, as per Business Korea citing a Samsung Electronics official, it pointed out that there is no change in the plan to introduce ASML High NA EUV equipment and assured that the R&D center of the two companies will still be established in the optimal location.

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(Photo credit: 대한민국 대통령실)

On August 19, AMD announced its acquisition of ZT Systems, a cloud computing and AI data center equipment designer, for a total value of USD 4.9 billion. This move is intended to strengthen AMD’s AI computing capabilities, while hinting at its challenge to NVIDIA’s dominance in the AI market.

AMD plans to complete the acquisition in the first half of next year. Industry sources cited in a report from Economic Daily News interpret this move as AMD’s strategy to expand its AI chip market reach, extending its influence from chip design to system integration in the AI sector.

AMD CEO Lisa Su stated in an interview that ZT Systems generates over USD 10 billion in annual revenue, nearly half of AMD’s reported USD 22.7 billion revenue last year.

However, AMD plans to sell off ZT Systems’ manufacturing business after the acquisition is completed, while retaining its system design business. Per a report from Reuters, Su further explained that this decision is because AMD has no plans to compete with companies like Super Micro Computer.

“Our acquisition of ZT Systems is the next major step in our long-term AI strategy to deliver leadership training and inferencing solutions that can be rapidly deployed at scale across cloud and enterprise customers,” said Lisa Su.

AMD will be able to offer a broader range of chips, software, and system designs to large data center clients like Microsoft and Meta after acquiring ZT Systems.

AMD also noted that once the acquisition is finalized, ZT Systems CEO Frank Zhang will remain in his position. In the statement, Frank Zhang expressed that joining AMD will help ZT Systems play a larger role in designing AI infrastructure that defines the future of computing.

Regarding concerns about the potential impact of AMD’s acquisition of ZT Systems on NVIDIA chip supplies, one of ZT Systems’ major shareholders Inventec reassured that existing orders for H100, H200, and GB200 chips will remain unaffected. Current collaboration projects will continue as planned, and the customer base will not change.

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(Photo credit: AMD)

On August 16, the U.S. government announced a preliminary agreement with Texas Instruments (TI) to propose up to USD 1.6 billion in direct funding through the CHIPS and Science Act to support three 300mm semiconductor wafer fabrication plants (Fabs) under construction in Texas and Utah. Two of them (SM1 and SM2) is located in Sherman, Texas, and one (LFAB2) in Lehi, Utah.

Haviv Ilan, President and CEO of Texas Instruments, stated that the company plans to increase its internal manufacturing rate to over 95% by 2030, and is currently expanding its 300mm wafer capacity to meet customer demand for analog and embedded processing chips in the coming years.

The funds will respectively be used to build the clean room for SM1 and complete the initial production pilot line, construct the clean room for LFAB2 to start initial production, and build the shell for SM2. In addition to the funding, the U.S. government will also provide up to USD 3 billion in loans to TI.

Moreover, TI expects to receive an estimated USD 6 billion to USD 8 billion from the U.S. Department of Treasury’s Investment Tax Credit for qualified U.S. manufacturing investments, which will support the company’s investment of over USD 18 billion in building the new facilities.

Previously, TI announced the plan to spend USD 30 billion to construct up to four interconnected wafer fabs (SM1, SM2, SM3, SM4) to meet customer demand for the coming decades.

As per its 2022 plan, TI will build six new 300mm wafer fabs by 2030. Among them, RFAB2 in Richardson, Texas, and the LFAB plant acquired from Micron began production in 3Q22 and 1Q23, respectively. Two of the four Sherman plants completed construction in 2023, with the remaining two to start construction between 2026 and 2030.

Aside from the above mentioned plan, TI announced the construction of a second 300mm fab in Lehi, Utah in February 2023, which commenced construction in the second half of 2023 and is expected to start production as early as 2026.

This fab will primarily produce analog and embedded processing chips. It is adjacent to the existing 300mm wafer fab LFAB. Once completed, the two fabs will be merged into a single operation.

Looking forward, TI aims to achieve revenue of USD 45 billion by 2030, more than doubling its 2022 revenue. The company targets a compound annual growth rate (CAGR) of 7% over the next decade, compared to an average growth rate of 4% from 2010 to 2020.

To achieve this, TI has revised its capital expenditure plans, increasing its annual capital spending to USD 5 billion for 2023-2026, with capital expenditures accounting for 10%-15% of revenue after 2027.

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(Photo credit: Texas Instruments)