China's largest chipmakers have purchased enough advanced semiconductor manufacturing equipment to sustain their operations for roughly three years, a strategic move that buys time for domestic companies to develop homegrown alternatives to Western technology before new US export controls take effect. This stockpiling effort, combined with Huawei's coordination of a domestic chip-machine development program, represents a significant shift in how Beijing is responding to Washington's escalating restrictions on semiconductor technology.

Why Is China Stockpiling Chip-Making Equipment?

The United States has been systematically restricting China's access to advanced semiconductor technology since October 2022, starting with bans on Nvidia's most powerful artificial intelligence chips and expanding to include the specialized machines that manufacture those chips. The restrictions target equipment made by ASML, a Dutch company that holds a near-monopoly on the most advanced lithography scanners, which are the machines that print circuit patterns onto silicon wafers.

China's two major memory-chip manufacturers, CXMT and YMTC, have responded by purchasing enough ASML machines to cover their expansion plans for the next three years. This stockpile strategy reflects a calculated bet: by securing equipment now, these companies can continue producing chips at scale while domestic alternatives are being developed and refined. The timing is critical because a bipartisan bill in the US House of Representatives, the Multilateral Alignment of Technology Controls on Hardware (MATCH) Act, would bar ASML from selling its most advanced remaining machines to China and require licenses for every service call on equipment already installed.

How Is China Building Its Own Chip-Making Machines?

Huawei has taken on a project management role in China's effort to develop domestic alternatives to ASML's equipment. The company is coordinating investments across the supply chain and pushing homegrown tools into production at SMIC, China's largest chipmaker. At the center of this effort is a scanner built by Shanghai startup Yuliangsheng, which is being tested at SMIC and on Huawei's own production lines.

Yuliangsheng's immersion scanner has been in testing since September 2025 and is targeting production of 28-nanometer chips in a single pass and 7-nanometer chips using a multi-patterning technique, which involves printing the same layer multiple times to achieve finer detail. One source told the Financial Times that output of these domestic scanners will reach 12 units by the end of 2026. However, the company still faces significant technical hurdles, particularly in two critical components where Chinese suppliers lag behind international competitors.

• Projection Lenses: Yuliangsheng currently sources projection lenses from Germany's Zeiss, which supplies lithography optics exclusively to ASML. Huawei is backing a replacement through Fujian Zhiqi Photonics, a company spun out of optical-materials maker Castech in 2022, which received a Rmb100 million investment from a Huawei-backed fund in 2023.
• Light Sources: Japan's Gigaphoton and ASML subsidiary Cymer dominate the light-source market globally. Beijing RSLaser, also backed by Huawei's venture arm, has supplied light sources for older machines and is developing one for the 28-nanometer tool, though building a light source that runs stably at high power remains technically challenging.
• State-Backed Support: Shanghai Micro Electronics Equipment, China's older state lithography house, is supporting Yuliangsheng with multiple prototypes, some built with foreign components and others used to test domestic substitutes, while a larger state-backed effort through Shanghai Aishengna Electronic Technology Group is also pursuing mass production of domestic immersion scanners.

What Does This Mean for China's AI Ambitions?

The stakes of this chip-equipment race are directly tied to China's artificial intelligence capabilities. Chinese open-weight AI models, which are publicly available and can be modified by anyone, have made remarkable progress despite having less access to cutting-edge hardware than their US competitors. All ten of the top open-weight models on Artificial Analysis's spring Intelligence Index came from China-based labs, and the best scored just six points behind the leading closed-weight US model. Chinese models also surpassed American ones in token share on OpenRouter in early June, a metric that measures how frequently models are used.

This progress has been achieved using chips like Huawei's Ascend accelerators, which are manufactured using ASML's deep-ultraviolet scanners with multi-patterning techniques. DeepSeek, a prominent Chinese AI company, has ordered 160,000 Ascend 950DTs for its Inner Mongolia data center. Every one of these chips still traces back to a Dutch scanner, but the domestic scanner that Huawei is project-managing is designed to eventually replace it.

"Huawei is playing a project management role in China's DUV push. A prototype is of limited value without the thousands of vendors, fabs and customers needed to make it reliable at industrial scale," said Lin Qingyuan, analyst at Bernstein.

Lin Qingyuan, Analyst at Bernstein

How Long Will the Stockpile Strategy Work?

The three-year window created by China's equipment purchases is not indefinite. While SMIC has begun testing Yuliangsheng's machines, it continues to rely on ASML tools for actual production. The stockpile buys time for Chinese suppliers to move from prototype to industrial-scale reliability, a process that typically requires years of collaboration between equipment makers, chip manufacturers, and customers.

ASML's financial performance reflects the ongoing importance of the Chinese market despite export restrictions. The company's Chief Financial Officer, Roger Dassen, stated in July that China would represent roughly 20 percent of 2026 sales, down from 33 percent in 2025 but on a larger revenue base. ASML raised its full-year guidance to 43 to 45 billion euros the same day, with its servicing and upgrade business generating 2.76 billion euros in the second quarter alone.

The broader context reveals a technology competition playing out across multiple fronts. China purchased 49.6 billion dollars of chip equipment in 2024, representing 42 percent of the world total, much of it purchased ahead of anticipated export control rounds. Nearly 1,400 ASML machines were already installed in China as of late 2023, according to ASML's China president, and that number has continued to rise.

Steps to Understanding the Chip Export Control Landscape

• Track Export Control Announcements: Monitor statements from the US Department of Commerce, the White House, and Congress regarding semiconductor export restrictions, as these directly impact which technologies Chinese companies can access and when.
• Follow Domestic Alternative Development: Watch for progress reports from Chinese chipmakers like SMIC, CXMT, and YMTC regarding their testing and adoption of domestic lithography equipment, as successful deployment would signal a major shift in technological independence.
• Assess Supply Chain Vulnerabilities: Pay attention to which foreign components Chinese domestic chip-machine makers still depend on, particularly from Germany and Japan, as these represent potential chokepoints for future export controls.

The competition between US export controls and Chinese technological self-sufficiency is entering a critical phase. The three-year stockpile provides a buffer, but it is not a permanent solution. Whether China's domestic chip-equipment industry can mature from prototype to production-scale reliability within that window will significantly shape the future of global semiconductor competition and, by extension, the trajectory of artificial intelligence development worldwide.