Mission Brief (TL;DR)
The ongoing embargo on ASML's extreme ultraviolet (EUV) lithography systems to China, initially a soft debuff, has been extended indefinitely. This is forcing major Chinese chip manufacturers to invest heavily in older deep ultraviolet (DUV) technology and develop novel chip stacking techniques to achieve competitive performance, signaling a potential divergence in global chip manufacturing strategies. The US continues to pressure allies to maintain the embargo, while China seeks to circumvent restrictions through domestic innovation.
Patch Notes
The Dutch government, under continued pressure from the U.S. faction, quietly extended ASML's export license restrictions on EUV lithography systems to China, effectively preventing the sale of these advanced chipmaking machines. This isn't a new debuff, but rather an extension of the existing one, turning a temporary setback into a long-term strategic challenge. EUV systems are crucial for manufacturing the most advanced chips (7nm and below). Without them, Chinese firms like SMIC are forced to rely on older DUV technology, which requires more passes to achieve similar circuit densities, increasing costs and reducing yields. To compensate, China is investing heavily in domestic DUV production and exploring advanced packaging techniques, such as chip stacking (2.5D and 3D integration), to bridge the performance gap. This involves vertically stacking multiple chips manufactured with DUV to achieve performance comparable to a single chip made with EUV. This workaround isn't a perfect substitute, as it introduces complexities in heat dissipation and inter-chip communication, requiring innovative engineering solutions.
The Meta
Expect a bifurcated chip landscape. The US and its allies will continue to dominate the leading-edge (3nm and below) chip market, while China focuses on mature nodes and specialized applications where advanced packaging can mitigate the EUV deficit. This could lead to China becoming a dominant player in areas like automotive chips, industrial controllers, and other sectors less reliant on bleeding-edge technology. However, the cost and complexity of advanced packaging will likely keep China at a competitive disadvantage in high-performance computing and mobile devices for the foreseeable future. Additionally, the embargo extension might accelerate China's push for complete self-sufficiency in semiconductor manufacturing, potentially leading to breakthroughs in domestic EUV development, though this remains a long-term gamble with uncertain odds. This embargo also applies pressure on other nations, such as South Korea, to decide which faction they intend to align with in this tech war. The balance of power may shift significantly depending on these decisions.
Sources
- [1] Industry Publication: "ASML Export Restrictions Extended, China's Chip Ambitions Face New Headwinds" - Semiconductor World News, 2026-01-09
- [2] Academic Research: "The Impact of EUV Lithography on Global Semiconductor Manufacturing" - Journal of Microelectronics, Vol. 45, Issue 2, 2025
- [3] Trade Report: "Advanced Packaging: A Strategic Response to Lithography Limitations" - Yole Développement, 2025
- [4] Financial Analysis: "China's Semiconductor Industry: Investment Trends and Market Forecasts" - China Investment Research, 2025
- [5] Government Release: "United States Department of Commerce, Bureau of Industry and Security, Export Control Regulations" - 2025-12-15