China Faces ‘Critical Chokepoint’ in Advanced Chipmaking Tools, Think Tank Says

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Jul 16, 2025 - 10:02 Updated: Jul 16, 2025 - 09:51
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China Faces ‘Critical Chokepoint’ in Advanced Chipmaking Tools, Think Tank Says
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China made little progress in advancing its semiconductor lithography technology over the past five years, despite a government effort to support its domestic semiconductor manufacturing equipment (SME) industry, according to a report published by the Center for Security and Emerging Technology on July 14.

The report’s researchers outlined the changes in market shares of key countries, including the United States, the Netherlands, Japan, China, and South Korea, in the SME industry between 2019 and 2024. One key sector in the SME industry is lithography, a crucial step in the chipmaking process that involves exposing silicon wafers to ultraviolet (UV) light to transfer circuit patterns onto the wafer surface.

“China’s near-zero gain in the overall lithography market underscores how little headway domestic suppliers have made in the most complex SME segment,” the researchers wrote.

“Even in the i-line lithography tool segment—tools for legacy chip fabrication—China has only maintained a modest 4% market share. This demonstrates that lithography remains the critical chokepoint where foreign incumbents maintain a formidable lead.”

According to the report, the Chinese company holding the 4 percent market share is Shanghai Micro Electronics Equipment (SMEE), which was added to the U.S. Commerce Department’s Entity List in 2022 for “acquiring and attempting to acquire U.S.-origin items in support of China’s military modernization.”
Legacy semiconductors are defined as chips with feature sizes of 28 nanometers (nm) or larger, which are manufactured using mature semiconductor fabrication technologies that have been around for 10 to 20 years. In contrast, the most advanced semiconductors, which can be as small as 10 nm to 3 nm in size, are made with cutting-edge equipment and technologies.

The Netherlands continues to be the leading supplier of lithography tools, holding a 79 percent share, followed by Japan with 17 percent, according to the report.

Dutch company ASML is the world’s only producer of extreme ultraviolet (EUV) lithography equipment used in the manufacture of advanced semiconductor chips. The company has been subject to export restrictions to China since 2019.
In May, David Sacks, President Donald Trump’s special adviser for artificial intelligence and crypto, wrote on social media platform X that restricting the sale of EUV lithography tools to China “is the single most important export control” the United States has in the area of semiconductors.

“The first Trump administration began the restriction, and it’s of paramount importance that it continues,” Sacks said.

Despite the lack of progress in lithography, from 2019 to 2024, Chinese companies made “notable gains” in certain SME sectors, including chemical mechanical planarization (CMP) tools, dry etch tools, and deposition tools, according to the report.

CMP is also a chipmaking process whereby the surface of a semiconductor wafer is flattened by a combination of chemical and mechanical forces. This process is carried out to either remove excess material or create a smooth, level surface that serves as a suitable foundation for the next layer of circuit elements.

The researchers noted that while the United States has the highest market share at 60 percent for CMP tools, China made a notable jump from just 1.5 percent in 2022 to nearly 11 percent in 2023.

In 2024, China accounted for 11 percent of the market share in dry etch tools, which typically use reactive gases or plasma to selectively remove specific materials during the chipmaking process. According to the report, China’s market share trailed behind that of the United States (59 percent) and Japan (29 percent).

Deposition involves adding thin films of material on a substrate in the chipmaking process, typically using methods such as physical vapor deposition and chemical vapor deposition.

According to the report, China’s market share in deposition increased from 2 percent in 2019 to 7 percent in 2024, driven by Chinese state-backed companies such as NAURA, Piotech, and AMEC. Nonetheless, the United States remains in the lead with 61 percent of market share, followed by Japan with 15 percent and the Netherlands with 11 percent.

“In the coming years, the key question will be whether China utilizes its progress to date as a springboard to achieve breakthroughs in more advanced SME segments,” the researchers concluded.

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