Semiconductor Materials & Equipment: ASML vs. SMEE

Semiconductor manufacturing is an ultra-precise, multi-stage craft where the quality of tools and materials determines the ceiling of performance. Control over these “choke points”—from photolithography systems to photoresists and wafers—translates directly into market power. That is why countries and firms that lead in equipment and materials effectively set the pace for the entire chip supply chain.

Why equipment & materials decide market power

Modern chips are defined by how finely we can pattern features on silicon. Shrinking line widths demands extraordinary tools—most notably the lithography systems that transfer circuit patterns. EUV (extreme ultraviolet) scanners have become indispensable for sub-7nm production, and ASML is the sole supplier. By contrast, China’s SMEE remains centered on DUV (deep ultraviolet) tools and has yet to break through to EUV, leaving a multi-generation gap at the cutting edge.

Materials are the other half of the equation. Wafers, photoresists, etch and deposition gases, and specialty chemicals determine yield and uniformity. Ultra-pure, uniform wafers and next-gen photoresists are prerequisites for advanced nodes. Japan’s dominance in several critical materials (e.g., EUV photoresists, fluorinated chemistries) shows how control of inputs can modulate the trajectory of entire national industries.

Finally, barriers to entry are enormous. Lithography integrates world-class optics, precision mechatronics, nanometer metrology, and exotic light sources. A single EUV tool contains thousands of ultra-precise components and requires years of co-development with a small constellation of specialty suppliers. Replication is not just costly; it is structurally difficult.

Add geopolitics to the mix. The U.S., EU, and Japan have tightened export controls to prevent transfer of key technologies to China. The Netherlands’ licensing restrictions on ASML’s advanced scanners have become a focal point, limiting China’s path to the most advanced nodes. Meanwhile, episodes like Japan’s 2019 controls on select materials underscored how concentrated inputs can stress supply resilience.

ASML: EUV’s sole supplier and the Netherlands’ technology moat

ASML stands alone in EUV lithography and is steadily raising the bar with High-NA EUV. EUV uses 13.5 nm light to pattern features that were impractical with DUV without costly multi-patterning. It is the backbone for 5 nm, 3 nm, and soon 2 nm-class manufacturing.

The technical core is daunting. ASML’s EUV source—co-developed with Cymer—vaporizes tin droplets with high-power lasers tens of thousands of times per second to generate EUV radiation. Because EUV is absorbed by air and conventional glass optics, the system runs in vacuum and relies on Zeiss’s ultra-flat, multilayer reflective mirrors—another singular capability. This tightly coupled supplier network forms a de facto exclusivity: no one else can assemble the entire stack at comparable performance and reliability.

The strategic consequences are global. Since 2019, Dutch export controls—aligned with U.S. policy—have prevented shipments of EUV tools to China. For leading-edge manufacturers like TSMC, Samsung, and Intel, access to ASML capacity has become a strategic variable in its own right. Looking ahead, ASML’s High-NA EUV aims to lift resolution further, extending the roadmap for 2 nm and below and reinforcing the company’s structural lead.

SMEE: China’s push for domestic lithography

Founded in 2002 in Shanghai, SMEE is China’s flagship lithography hopeful, backed by significant state support under programs such as “Made in China 2025.” Its portfolio today focuses on DUV platforms—KrF (248 nm) and ArF (193 nm)—covering roughly the 90–28 nm range. The company’s next milestone is ArF immersion, which, paired with aggressive multi-patterning, can in principle reach down toward the mid-teens.

But the gap to EUV remains large. Achieving EUV requires breakthroughs in three domains simultaneously: (1) the light source (high-power laser-produced plasma), (2) the reflective optics stack (EUV mirrors at Angstrom-level flatness), and (3) defect-free, high-NA system integration and metrology—each governed by a small set of entrenched suppliers outside China. With advanced tool and component exports restricted, SMEE’s path depends on cultivating homegrown substitutes across the stack—a multi-year, high-risk endeavor.

China’s foundries have demonstrated limited 7 nm-class chips using DUV multi-patterning, but this approach imposes cost, complexity, and yield penalties that are hard to scale for broad, competitive production at the cutting edge. In the near term, China’s equipment strategy will remain strongest in mature nodes and specialty domains while it works to close the long-lead gaps in optics, sources, and metrology.

The wider landscape in equipment and materials

Equipment leaders. Lithography is dominated by ASML (EUV/DUV). Nikon and Canon continue to compete in DUV and retain relevance in mature nodes. Beyond lithography, U.S. firms such as Applied Materials (deposition), Lam Research (etch), and KLA (inspection/metrology) anchor other critical steps. These markets are capital-intensive, IP-dense, and consolidate know-how through long supplier relationships.

Wafers. Shin-Etsu Chemical and SUMCO (Japan) together supply more than half of the world’s silicon wafers, with SK Siltron (Korea) and GlobalWafers (Taiwan) among other key producers. Advanced logic and memory demand nine-nines purity and exceptional flatness—capabilities built over decades.

Photoresists. Japan leads in advanced resists (JSR, TOK, Fujifilm), with EUV-class chemistries still concentrated. The U.S. and Europe are nurturing alternatives, and Korea is pushing domestic options (e.g., Dongjin Semichem), but leadership remains heavily Japan-centric.

Process gases & chemicals. Linde (U.S.), BASF (Germany), Showa Denko (Japan), and SK Materials (Korea) supply the high-purity gases and specialty chemicals essential for etch, deposition, cleaning, and pattern transfer.

As logic pushes toward—and below—2 nm, lithography resolution, resist sensitivity and line-edge roughness, mask defects, overlay control, and stochastic effects become even more intertwined. The upshot: dependence on a handful of equipment and materials specialists will likely deepen before it diversifies.

Outlook: contested choke points, diverging trajectories

• ASML’s trajectory is to extend its lead with High-NA EUV, tightening the integration of optics, sources, metrology, and computational lithography. Given the complexity and supplier ties, its monopoly in EUV looks durable over the medium term.

• China’s trajectory is dual-track: scale domestic DUV tools and mature-node ecosystems while investing in long-horizon substitutes for EUV-class components. The constraint is not only capital and engineering depth but also the time constants of precision-optics and source ecosystems.

• Materials competition will intensify. EUV-grade resists, next-gen hardmasks, and ultra-low-defect wafers are strategic levers; expect continued industrial policy to localize these inputs across the U.S., EU, Korea, and Japan.

• Policy and resilience will remain central. Export controls and friend-shoring are now structural features of the industry, shaping who can access which tools at what nodes and volumes.