Why Is ASML Stock Falling Today?

• The Shanghai-based company plans to manufacture about five immersion DUV systems this year and around 20 in 2027, well below ASML's output of 131 immersion DUV systems last year, the report stated.
• ASML makes both DUV and extreme ultraviolet lithography machines that are critical in manufacturing semiconductor chips.
• The Dutch firm has been banned from exporting its EUV machines to China due to export controls led by the U.S.

Shares of ASML Holding NV (ASML) fell over 7% in Monday’s midday trade amid a report that a Chinese state-backed company has started manufacturing immersion deep ultraviolet (DUV) lithography machines.

According to a report by The Information, the company has started producing one of the semiconductor industry's most critical manufacturing tools and plans to deliver the systems to domestic chipmakers as China looks to reduce its reliance on technology from other countries to make chips, which are at the heart of the ongoing AI boom.

ASML was among the top trending tickers on Stocktwits at the time of writing.

China’s DUV Program Is Currently In Early Stages, Says Report

According to the report, China's DUV program remains in its early stages. The Shanghai-based company plans to manufacture about five immersion DUV systems this year and around 20 in 2027, well below ASML's output of 131 immersion DUV systems last year.

The report also said that Chinese chipmakers will likely need months, if not longer, to validate the machines’ accuracy, reliability and compatibility before deploying them on production lines.

While the domestically built systems currently trail ASML’s products in performance and build quality, increasing local production could gradually erode the Dutch company’s position in China over time.

Why DUV Machines Matter

Immersion DUV lithography systems are among the semiconductor industry's most important manufacturing tools, used to print circuit patterns onto silicon wafers.

While ASML's more advanced extreme ultraviolet (EUV) machines are required for the most cutting-edge chips, DUV systems remain essential for producing a wide range of semiconductors, including mature chips used in automobiles, industrial equipment and AI infrastructure.

The report stated that Chinese chipmakers have also used immersion DUV machines with multiple patterning techniques to manufacture more advanced processors despite lacking access to ASML's EUV equipment.

ASML makes both DUV and EUV lithography machines that are critical in manufacturing semiconductor chips. However, the Dutch firm has been banned from exporting its EUV machines to China due to U.S.-led export controls. These export controls also prevent ASML from exporting its most advanced DUV machines to China.

AI Demand Still Favors ASML

Despite China's progress, ASML faces little near-term risk as global AI-driven chip demand continues to outpace manufacturing capacity.

The report noted that Chinese customers have recently agreed to pay about 10% more for some of ASML's less-advanced DUV systems, while domestic alternatives remain years away from matching the Dutch company's performance and scale.

What Does ASML Do?

ASML is a Dutch technology company that makes highly advanced machines used to manufacture semiconductor chips.

The company is best known for its EUV lithography machines, which are extremely complex systems that use ultraviolet light to print tiny transistor patterns onto silicon wafers.

Chipmakers like Nvidia Corp. (NVDA), Taiwan Semiconductor Manufacturing Co. (TSMC), Intel Corp. (INTC), Micron Technology Inc. (MU), and others use ASML’s tools.

ASML stock is up 51% year-to-date and 127% over the past 12 months. The iShares Semiconductor ETF (SOXX) is up 110% over the past 12 months, while the Global X Artificial Intelligence & Technology ETF (AIQ) is up 29%.

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