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TL;DR
China is making significant progress in domestic chip manufacturing, including producing advanced lithography tools. However, the main challenge remains in accumulating the tacit knowledge necessary for reliable, high-yield production, which takes years of real-world experience.
China has started mass-producing domestic immersion DUV lithography machines capable of producing chips at 7- and 5-nanometer nodes, according to multiple credible reports. This marks a significant step in China’s effort to develop independent semiconductor manufacturing capabilities, especially after export controls limited access to EUV technology. While these machines exist, the challenge remains in achieving reliable, high-yield production at scale, which is essential for commercial viability and long-term competitiveness.
China’s leading chipmaker, SMIC, is reportedly producing 7-nanometer chips using domestically developed DUV tools, with yields estimated around 20 percent—substantially lower than the 90 percent yields typical of high-end EUV-based fabs. Separately, reports indicate that China is prototyping EUV machines, a breakthrough that signals progress but is still in early stages. Huawei aims to produce over a million AI accelerators this year, demonstrating the country’s focus on moving up the technology stack.
However, experts emphasize that the existence of machines alone does not equate to manufacturing mastery. The core issue is the extensive tacit knowledge required to operate these tools reliably at scale. This knowledge is accumulated through years of running processes, fixing failures, and iterative learning. Currently, China faces hurdles in achieving consistent yields and establishing a self-sustaining supply chain for critical materials like high-purity photoresist, which is predominantly imported from Japan.
Every few weeks a headline says China cracked the last hard problem in chipmaking — and triggers alarm in one camp, triumph in the other. Both overreact, because both mistake a learning-by-doing problem for a copying problem. It isn’t one.
▲ Forward-looking · figures are point-in-time estimates“A machine exists” and “a machine makes advanced chips at scale, profitably, for years” are separated by a chasm — made of things that only accumulate with time.
In a race, a burst of speed closes the gap. In a phase transition, you can’t move faster to cross over — you have to accumulate enough, slowly, until the system changes state.
When you see “China achieves X,” ask which of two very different claims is actually being made.
Even amid the loud headlines, the quiet data points all say the same thing.
No prototype, no shipped tool, no yield headline teleports past it.
Why Mastering Tacit Knowledge Is Crucial for China
The progress in domestic lithography tools indicates China’s strategic push to reduce reliance on Western technology. Yet, the real challenge lies in the 'learning-by-doing' process—gaining the tacit knowledge necessary for consistent, high-yield manufacturing. Without this, even advanced machines cannot produce commercially viable chips reliably or profitably. This understanding underscores that technological independence in semiconductors is a long-term, incremental process rather than a race won by building the most machines.
semiconductor manufacturing equipment
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China’s Semiconductor Ambitions and Export Controls
Over the past decade, China has invested heavily in developing its semiconductor industry, aiming for self-sufficiency amid rising export restrictions from Western countries. While China has made notable strides in building domestic equipment and expanding production capacity, experts acknowledge that the gap in process knowledge and materials remains significant. The global semiconductor industry is characterized by decades of tacit knowledge accumulation, which China is now attempting to replicate through persistent, incremental efforts.
"The existence of a machine does not mean China can produce chips reliably at scale. The real barrier is the years of experiential learning needed to master the process."
— Thorsten Meyer
Uncertainties in China’s Semiconductor Progress
It remains unclear how quickly China can close the yield gap and develop a self-sufficient supply chain for critical materials like high-purity photoresist. While prototypes and initial production are promising, experts agree that achieving reliable, high-volume manufacturing at advanced nodes will take several more years. The pace of knowledge accumulation and process optimization is difficult to predict precisely, given the complexity of the industry.
Next Steps in China’s Semiconductor Development
China is likely to continue refining its domestic lithography tools and expanding production capacity. Focus will be on improving yields, establishing a reliable materials supply chain, and reducing dependency on foreign servicing. Monitoring progress in process knowledge accumulation and material independence over the next 1-3 years will be critical to assessing China’s true manufacturing capability at advanced nodes.
Key Questions
Why is yield so important in chip manufacturing?
Yield determines how many chips produced are functional and usable. Higher yields mean more efficient, cost-effective production, which is essential for commercial viability at scale.
Can China achieve independent EUV lithography soon?
Current prototypes are in early stages. Experts estimate that domestically-made EUV tools capable of commercial production at sub-10 nanometers may not be feasible before around 2030.
What are the main barriers to China’s semiconductor independence?
The key barriers include mastering the tacit knowledge for reliable manufacturing, achieving high yields, and developing a self-sufficient supply chain for critical materials like high-purity photoresist.
How does this progress compare to Western industry leaders?
China’s domestic tools lag several generations behind industry leaders like ASML, and it will take years of process learning to reach comparable reliability and scale at advanced nodes.
Source: ThorstenMeyerAI.com
