China tests prototype system aimed at advanced chip manufacturing

• China tests a prototype EUV system aimed at producing advanced chips.
• China may be closer to reducing reliance on Western tools.

For more than a decade, control over advanced chipmaking has rested on a narrow choke point: the machines that carve the smallest features onto silicon. That control is now under pressure.

In southern China, engineers are testing a large, unfinished system designed to replicate the most sensitive step in advanced chip manufacturing. The machine, housed inside a secure facility in Shenzhen, is meant to perform extreme ultraviolet lithography – a process required to make the most advanced chips used in artificial intelligence systems, smartphones, and military hardware.

According to people familiar with the effortthe prototype was completed in early 2025 and is now undergoing testing. It can already generate extreme ultraviolet light, a core technical requirement. What it cannot yet do is produce working chips.

That distinction matters. EUV lithography is not a single breakthrough but a chain of tightly linked systems. Progress in one area does not guarantee success in another. Even so, the existence of a functioning prototype challenges long-held assumptions about how far China remains from advanced chip independence.

Until now, EUV technology has been mastered by only one company: ASML in the Netherlands. Its machines, which cost about $250 million each, are used by chipmakers like TSMC, Intel, and Samsung to produce the most advanced processors designed by companies including Nvidia and AMD.

In April, ASML chief executive Christophe Fouquet said China would need “many, many years” to build comparable systems. People close to the Shenzhen project say the timeline may be shorter, though still measured in years rather than months. Internal targets reportedly point to 2030 as a realistic date for producing usable chips, earlier than many analysts previously expected.

Chinese authorities did not respond to requests for comment.

China’s state-led push for advanced chip independence

The effort is part of a broader, state-backed push to reduce reliance on foreign semiconductor supply chains. President Xi Jinping has repeatedly described chip self-sufficiency as a national priority. What has not been public until now is how concentrated and secretive the most advanced work has become.

People familiar with the project say it operates under national security classification. Workers use aliases, access is tightly controlled, and employees inside the facility are given limited visibility into the full system. The goal, one person said, is to prevent leaks and compartmentalise risk.

“The aim is for China to eventually be able to make advanced chips on machines that are entirely China-made,” the person said.

“China wants the United States 100% kicked out of its supply chains.”

Huawei plays a central coordinating role, linking state research institutes, equipment suppliers, and manufacturing teams. While the company does not formally run the project, people familiar with Huawei’s operations say its engineers are embedded in the effort, from chip design to fabrication tooling and final product integration.

Huawei did not respond to requests for comment.

The strategy reflects lessons learned from years of export controls. Starting in 2018, the United States pressed allies to block ASML from selling EUV machines to China. Those limits expanded in 2022 to include older deep ultraviolet tools, with the goal of keeping China at least one generation behind in chipmaking capability.

The US State Department said the Trump administration has strengthened enforcement of those rules and is working with partners “to close loopholes as technology advances.”

The controls slowed China’s progress but also reshaped its approach. Instead of waiting for access, the focus shifted to replication and substitution. Older ASML machines, sold through auctions and secondary markets, became a source of parts and reference designs. Intermediary firms were used to mask buyers. Salvage replaced direct purchase.

At the same time, China began aggressively recruiting overseas semiconductor talent. Former ASML engineers – particularly those who had retired or were nearing retirement – became priority targets. Signing bonuses of several million yuan and housing subsidies were common, according to government policy documents reviewed by the people.

One recruit discovered that his onboarding paperwork included an identification card issued under a false name. Inside the facility, he recognised former colleagues from ASML, also working under aliases, and was instructed to use only their assigned names.

The secrecy extended beyond personnel. Workers were told not to disclose what they were building or even where they were working.

European privacy laws limit how closely ASML can track former employees. While staff sign non-disclosure agreements, enforcement in borders has proven difficult. ASML said it “vigilantly guards” its trade secrets and limits access to sensitive EUV knowledge even internally.

“It makes sense that companies would want to replicate our technology, but doing so is no small feat,” ASML said in a statement.

Progress made, limits remain

Technically, the Shenzhen system remains behind commercial EUV tools. ASML’s machines are already the size of a bus and weigh about 180 tons. The Chinese prototype is even larger, after earlier attempts to replicate the original footprint failed. The added scale was meant to increase power and stability, according to people familiar with the design.

Optics remain the weakest link. Western EUV systems rely on mirrors produced by Germany’s Carl Zeiss that take months to manufacture and must meet extreme precision standards. Chinese research institutes have attempted to build domestic alternatives, with partial success.

One institute helped integrate extreme ultraviolet light into the prototype’s optical system earlier this year, making sustained operation possible. Significant refinement is still needed.

Jeff Koch, an analyst at SemiAnalysis and a former ASML engineer, said progress depends less on theory than on reliability.

“No doubt this is technically feasible, it’s just a question of timeline,” he said. “China has the advantage that commercial EUV now exists, so they aren’t starting from zero.”

Inside the facility, about 100 recent graduates work full time dismantling and rebuilding components from EUV and older lithography machines. Cameras record each workstation. Successful reassembly earns bonuses.

Huawei staff assigned to semiconductor teams often live on site. Phone access is restricted for sensitive roles, and teams are kept isolated from one another.

“They don’t know what the other teams work on,” one person said.

What emerges is not a single breakthrough moment, but a slow, methodical attempt to close a gap that was once assumed to be permanent. Whether the effort succeeds will depend on time, coordination, and whether export controls can continue to hold a complex system together by denying access to just a few important parts.

For now, the machine in Shenzhen does not make chips. But it is no longer theoretical – and that alone has shifted the calculus.

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