According to MoneyDJ, citing Reuters, the U.S. government is actively working to curb the development of China’s semiconductor industry.

Republican Congressman John Moolenaar, chair of the House Select Committee on the Chinese Communist Party, along with senior Democratic Congressman Raja Krishnamoorthi, jointly sent letters to five semiconductor equipment manufacturers: ASML, Applied Materials, KLA, Lam Research, and Tokyo Electron. The lawmakers requested information on sales to China, arguing that China is using advanced semiconductor equipment to strengthen its military and is supplying chips to the Russian military, thereby threatening international order and security, as the Reuters report noted.

The report from MoneyDJ indicated that the U.S. government intends to expand the scope of export controls, including tightening the Foreign Direct Product Rule (FDPR) to prevent China from obtaining advanced equipment for military purposes, which would prohibit the export of semiconductor equipment containing U.S. technology to China.

However, this legislation has been delayed due to strong opposition from Japan and the Netherlands, as it would significantly impact the operations of semiconductor equipment manufacturers, as the report from MoneyDJ indicated.

On the other hand, as reported by the Financial Times, TSMC has informed Chinese companies that it will cease production of the most advanced AI chips at 7nm or below for Chinese customers starting on November 11. This decision is seen as a direct response to concerns about China’s access to cutting-edge technology. The report suggests that TSMC’s tightening and cessation of advanced chip supplies to Chinese clients could set back the AI ambition of major Chinese tech companies such as Alibaba and Baidu.

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• [News] TSMC Reportedly to Halt 7nm and Below Chip Shipments to China’s AI Firms Next Week
• [News] China’s Chipmaking Equipment Spending Likely to Drop below USD 40 Billion in 2025 amid U.S. Tensions

(Photo credit: istock photo )

Amid concerns on the impact of the U.S. presidential election as well as the ongoing chip war between the world’s two superpowers, China’s chipmaking equipment market is expected to contract next year, according to a report by Nikkei. Citing remarks from SEMI, in 2025, the semiconductor equipment market in China is anticipated to drop below USD 40 billion and back to the level of 2023, after peaking in 2024.

According to SEMI, the decline can be attributed to the cooling demand after a period of accelerated purchasing spurred by U.S.-China tensions, the Nikkei report mentions. Spending on semiconductor manufacturing equipment in China is projected to exceed USD 40 billion this year for the first time, according to SEMI.

On the other hand, according to an executive of the Chinese branch of a global chip equipment supplier cited by the report, in 2025, the semiconductor equipment market in China is anticipated to decrease by 5-10% from the previous year, which is resulted from the decline of utilization rates for equipment at China’s semiconductor factories as well as the previous rush in purchases.

The projection aligns with Dutch chip equipment giant ASML’s financial forecast released earlier in October. It now forecasts 2025 net sales between 30 billion and 35 billion euros (USD 32.7 billion to USD 38.1 billion), in the lower end of its previous guidance range, according to a report by CNBC.

Though during the July-September quarter, China contribute to around 50% of ASML’s sales, Chief Financial Officer Roger Dassen noted that the company expects its China business to show a “more normalized percentage in our order book and also in our business,” indicating that China would come in at around 20% of its total revenue for next year, according to the CNBC report.

It is also worth noting that according to SEMI, the market contraction in China extends beyond next year. According to the Nikkei report, SEMI projects that China’s spending on chipmaking equipment will experience an average annual decline of 4% in compound growth from 2023 to 2027.

On the other hand, chipmaking equipment spending remains robust in regions other in China. Citing SEMI’s projection, Nikkei notes that spending in the Americas is projected to grow 22% annually between 2023 and 2027, with Europe and the Middle East increasing by 19%, and Japan by 18%.

Despite declining growth, China will remain the largest market for semiconductor manufacturing equipment, with estimated spending of USD 144.4 billion from 2024 to 2027, according to SEMI. This exceeds investments in South Korea (USD 108 billion), Taiwan (USD 103.2 billion), the Americas (USD 77.5 billion), and Japan (USD 45.1 billion).

To elaborate a bit, Nikkei suggests that China’s heightened outlay aligns with its goal of achieving greater self-sufficiency in chip production, as its self-sufficiency rate was only 23% in 2023.

Naura Technology Group, a state-owned company, is China’s largest supplier of semiconductor manufacturing equipment, followed by Advanced Micro-Fabrication Equipment (AMEC), according to Nikkei.

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• [News] ASML Reports Disappointing Q3 Bookings while Lowering 2025 Forecast, Raising Concerns in Chip Sector
• [News] SMIC Reportedly to Manufacture 5nm Chips for Huawei Without EUV Machinery

(Photo credit: Naura Technology)

According to a report from TechNews, citing a report from Nikkei, TSMC is set to receive ASML’s most advanced High NA EUV lithography machines before the end of the year.

The machine, known as high numerical aperture extreme ultraviolet (High NA EUV) lithography equipment, costs over USD 350 million each and allows semiconductor manufacturers to produce wafers with smaller transistor line widths, according to Nikkei.

The report indicated that TSMC is likely to use the machines for its angstrom 10 (A10)  technology, expected to enter mass production sometime after 2030. The A10 technology is about two generations ahead of the 2-nm chips that TSMC plans to mass produce by the end of 2025.

The report from TechNews noted that acquiring High NA EUV lithography equipment does not guarantee a smooth entry into the “angstrom” (A10) domain. Chip manufacturers must still make design adjustments after acquiring the equipment.

According to the report from Nikkei, TSMC is not the first to acquire ASML’s latest and most advanced equipment—Intel was the first to adopt it. Intel’s Oregon fab received the first set of High NA EUV machines in the first quarter of this year, followed by a second set in the second quarter.

According to another report from TechNews, the CEO of ASML has announced that Intel’s second High-NA EUV system has been completely assembled in October.

On the other hand, according to Sedaily, Samsung is expected to begin bringing in its first High-NA EUV equipment between the end of this year and the first quarter of next year. However, the company is said to reduce the number of next-generation High NA EUV lithography machines it plans to introduce, according to a report from South Korean media outlet BusinessKorea citing sources.

Intel, Samsung, and TSMC are currently the only clients of ASML’s High NA EUV machines. Meanwhile, due to U.S. sanctions preventing Chinese companies from accessing ASML’s EUV products and services, ASML has lost the Chinese market. However, the company stated that it has still received orders for 10 to 20 units, as the report from TechNews indicated.

According to the report from TechNews, as ASML monopolizes the advanced EUV lithography market—essential for manufacturing next-generation semiconductors—the U.S. has started investing in EUV research to revive its domestic semiconductor supply chain. However, this effort may take years, or even decades, to bear fruit.

According to a report from eeNews, recently, the U.S. government is funding a billion-dollar research center focused on next-generation EUV process technology, marking the first CHIPS for America R&D flagship facility. This initiative is designed to advance domestic capabilities in semiconductor technology.

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• [News] Samsung Reportedly Reduces Procurement of ASML’s Next-Generation EUV Lithography Equipment
• [News] Intel Completes Assembly of Second High-NA EUV System, ASML Confirms

(Photo credit: TSMC)

Ahead of the upcoming U.S. presidential election, U.S. semiconductor equipment giants Applied Materials and Lam Research are already working out to exclude Chinese firms from supply chains, driven by Washington’s directives to limit China’s role in sensitive leading-edge technologies, according to a report by The Wall Street Journal.

According to the report, major chip toolmakers, including Applied Materials and Lam Research, are notifying suppliers that they must source alternatives for certain Chinese components or risk their vendor status. Suppliers have also been informed that they must not have Chinese investors or shareholders, according to sources cited by the report.

The move would potentially drive up costs, as finding non-Chinese alternatives at comparable prices will be challenging, noted industry executives interviewed by The Wall Street Journal.

China is now reportedly the largest market by revenue for top global chip equipment suppliers. The latest quarterly financial reports from companies such as Applied Materials, Lam Research, and KLA show that China contributes approximately 40% of their sales.

When asked about whether the act of finding alternatives to Chinese-made components has been initiated, Lam Research stated it complies with U.S. export controls within the chip-manufacturing supply chain, while Applied Materials indicated it seeks alternative component sources to ensure consistent availability, according to the report.

It is worth noting that as the U.S.-China Chip War escalates, both presidential candidates, Donald Trump and Kamala Devi Harris, promise a firmer stance on trade with China, and the semiconductor industry is particularly targeted due to its national security significance recently.

Earlier in September, the Biden administration has introduced new export controls targeting critical technologies, including quantum computing, advanced chip making tools, specific components and software tied to metals and alloys, and high-bandwidth chips essential for AI applications, according to a previous report by CNBC.

While these restrictions apply globally, concerns have been raised on major semiconductor equipment companies, such as Dutch giant ASML and U.S. heavyweights Applied Materials and Lam Research.

The Wall Street Journal report also mentions that last year, the Commerce Department already introduced regulations requiring U.S. toolmakers to secure licenses before sharing technical details with Chinese suppliers. They received a temporary license to maintain current suppliers, set to expire at the end of 2025. This summer, the department clarified that suppliers outside China must also comply if their parent company is based in China.

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• [News] US Reportedly Expands Investigation into Applied Materials, Possibly due to Concerns of Shipments to SMIC
• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls

(Photo credit: Applied Materials)

Following recent downward revisions in annual financial targets by semiconductor lithography equipment manufacturers ASML and Canon, Nikon has also announced a cut to its forecast.

According to a press release from Nikon, the company expects its 2024 performance to fall short of initial plans due to delays in the recovery of market conditions within its Precision Equipment Business and Components Business, resulting in lower-than-expected demand and postponed sales of certain products.

Nikon has also revised its consolidated financial forecast for the year ending March 31, 2025, citing a delayed recovery in semiconductor-related markets as the reason for adjusting its sales plans in the lithography system sector. However, sales in the Imaging Products Business are anticipated to align with projections.

Notably, IC Smart reported that ASML revealed its Q3 financial results on October 15, reporting sales and gross margins in line with expectations. However, new orders plummeted by 53% quarter-over-quarter, falling short of half the market’s expectations. ASML has also lowered its 2025 sales target from a previously estimated range of €30 to €40 billion down to €30 to €35 billion, attributing the slowdown to a lagging recovery in most markets, with certain fabs delaying their demand for lithography systems, particularly EUV systems, despite strong demand in the AI sector.

The same IC Smart report noted that on October 24, Canon announced record high revenues for Q3 2024 (July to September) but also lowered its full-year performance expectations. Revenue was revised down from an initial estimate of ¥4.6 trillion to ¥4.54 trillion, while operating profit was adjusted from ¥465 billion to ¥455.5 billion. The net income target was cut from ¥335 billion to ¥325 billion, with Canon attributing this to an increase in the yen’s exchange rate. Additionally, the company has reduced its sales target for semiconductor lithography machines from 244 units to 239 units for the current fiscal year.

(Photo credit: ASML)