ASML’s China chip threat looks overdone

ASML Holding

28/07/2026 11:21

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Jennifer Johnson
LONDON, July 28 (Reuters Breakingviews) - Up until Monday, the chipmaking-equipment business looked like a one-horse race. There was longtime market leader ASML ASML.AS – and no one else. That changed with news that a state-backed firm in Shanghai is now producing deep-ultraviolet lithography (DUV) machines, one of the €540 billion Dutch group’s key products. Investors are understandably rattled, but ASML's technical lead is likely so vast that demand won't easily shift.
According to tech news outlet The Information, China has begun mass production of domestic DUV tools. The report added that five of the machines will be manufactured this year, with around 20 scheduled for production in 2027. Reuters later reported that the little-known Shanghai Aishengna Electronic Technology Group is leading the effort, citing a source familiar with the matter.
ASML revealed China represented 29% – or about €9.5 billion – of total net sales in 2025. All of this revenue is associated with DUV machines and services, as export controls prevent ASML from selling its cutting edge extreme-ultraviolet (EUV) tools in the country. The market’s reaction suggests investors are pricing in a material near-term financial hit. As of 1030 GMT on 28 July, the stock was trading at around €1,400 – down roughly 11% from the previous day. That fall wiped around €60 billion from its market value.
The pessimism is probably overdone. According to a Visible Alpha poll of analysts, ASML trades on an enterprise value to sales multiple of 10 times for 2027. Therefore, the share price plunge could be read as implying that €6 billion in annual sales are at risk. That looks a stretch: it's half of the €12 billion in sales ASML generated globally by selling a much larger number of DUV machines – 279 –  last year. There are also doubts around the performance, reliability and chip-processing speed of China's new machines, meaning that the incumbent is likely to have a durable technical advantage over its new rivals.
Demand should also cushion any impact. The company is planning to increase manufacturing capacity for its most advanced DUV immersion tools by 30% in 2027. The current wave of investor discontent is likely driven by broader weakness in AI sentiment, compounded by longer-term concerns that China could one day produce tools capable of challenging ASML's. That's a real risk, but the threat is not imminent.
     
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CONTEXT NEWS
China’s Shanghai Aishengna Electronic Technology Group has begun mass production of deep-ultraviolet lithography (DUV) machines, Reuters reported on July 28 citing a person familiar with the matter. ASML is currently the world’s leading producer of these tools, which are critical to the chipmaking industry.
The Information, a tech industry news outlet, first reported on China’s DUV developments on July 27 – stating that an unidentified state-backed group is planning to produce five DUV machines this year, and roughly 20 in 2027.
ASML’s shares were trading at €1,405 each as of 0915 GMT on July 28, down almost 11% from the previous day’s opening price of €1,558.

(Editing by Aimee Donnellan; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))