China ramps up AI chip output with ASML upgrades

Chinese chipmakers are upgrading older ASML lithography machines to boost production of advanced AI chips, according to sources familiar with the process.

Companies such as Semiconductor Manufacturing International Corporation (SMIC) and Huawei are among those using older deep ultraviolet (DUV) machines from Dutch firm ASML, and may be retrofitting them with components sourced from overseas and third-party engineering support.

US and Dutch export controls bar ASML from supplying its most advanced machines or performance upgrades to China, but local fabs have used secondary market parts—including upgraded wafer stages, lenses, and sensors—to improve chipmaking precision.

These modifications allow Chinese fabs to produce seven-nanometre chips needed for AI and advanced smartphones, despite restrictions on accessing extreme ultraviolet (EUV) machines.

🔗 Source: Financial Times

🧠 Food for thought

Implications, context, and why it matters.

Reported SMIC 7nm retrofits lack scale data, obscuring commercial viability

Reports say SMIC uses multi-patterning at 7nm with older Deep Ultraviolet (DUV) tools, possibly retrofitted, yet capacity and yield data remain absent. Multi-patterning uses multiple lithography exposures to print finer features with older equipment.
SMIC’s 7nm yields reportedly reached 60-70% 1. TSMC’s early Extreme Ultraviolet (EUV) runs hit about 76% 1, while SMIC targets roughly 45,000 wafers per month by end-2025 2.
That output could support millions of AI chips with modest allocation 2. Missing wafer starts per month and die yields for retrofitted tools keep volume potential unclear.
Clarity on monthly 7nm wafers from retrofitted versus standard DUV gear is lacking. Investors and rivals cannot judge if China’s bottleneck is easing or still tight.

Multi-patterning at 7nm creates photomask capacity surge opportunity

Photomask makers and inspection tool vendors gain from 7nm multi-patterning at SMIC, since each design needs more masks. That also lifts demand for defect inspection equipment. Optical Proximity Correction (OPC) is software-driven pattern tuning so printed features match intended designs.
In display photomasks, Supermask and Newway held a combined 22% share in 2024 3. Supermask started output at a new Foshan plant in 2025, while Newway is building a Xiamen site to ramp in 2026 3.
The global laser photomask market is set to grow at 3% CAGR through 2034 4. China’s segment grows 4.9% CAGR 4, as localization trends push manufacturing demand back onshore 5.
Investors and suppliers eyeing China’s 2025-2026 photomask buildout can position for this surge. Advanced reticle photomasks (the master templates used in lithography) for sub-7nm nodes held 43% market share in 2024 4.