ASML's China problem couldn't have come at a worse time: Lionel Laurent

Bloomberg's Lionel Laurent argues that reports of a Chinese firm nearing production of rival chipmaking machines have rattled ASML investors at the worst possible time, given the Dutch company's AI-driven sales boom. While analysts still see China 7-10 years behind ASML's technology, the bigger worry is that US-led export controls meant to contain Beijing have instead accelerated its push for self-sufficiency. For South Africa, watching from the periphery of the global chip race, the piece is a reminder of how geopolitics, not just innovation, increasingly shapes who controls critical technology — and how export bans can backfire on their architects..By Lionel Laurent.“Onderdompelinglithografiebelichtingsinrichting,” the Dutch word for the devices made by ASML, is hard to say — which is apt considering how difficult it is to build these prized chipmaking machines.They’re big and expensive, and they do the complicated work of printing circuit patterns that are invisible to the naked eye onto silicon wafer, in a process known as immersion lithography exposure. ASML Holding NV has a roughly 90% share of the global market for manufacturing these tools and a total monopoly on the ultra-sophisticated end of the technology known as EUV.Hence why any sign of competition on the horizon can rattle investors in what has become Europe’s biggest tech company. ASML’s sales are expected to grow by 31% in 2026 because of the AI-fueled spending binge by its chipmaker customers. Yet its shares had their worst couple of days in years after The Information website reported that an unnamed Chinese firm was on the brink of producing batches of rival machines, at a rate of 20 a year by 2027.For comparison, ASML has the capacity to make about 130 of the more basic model of these machines annually, and plans to lift that by a third. It also aims to ship about 60 of the advanced EUV models, a technology still reportedly in the prototype stage for the Chinese. Still, ASML’s machines are the workhorses of the chipmaking industry and the Dutch company has had a free run of things before now. Shareholders are right to worry, especially with investors gloomier overall about AI spending..For ASML, this is not quite the same disruption “moment” seen elsewhere in tech, such as the impressive performance of Chinese AI software models closing the gap on OpenAI and Anthropic PBC. Its devices are more akin to the jet engines made by Rolls-Royce Holdings Plc or Pratt & Whitney, complex feats of engineering that take decades to develop. Building an ecosystem of suppliers and customers for such products takes ages, as does the tweaking and adjustment of new tools. Bloomberg Intelligence reckons China is still 7-10 years away from being able to match ASML technology, with full substitution taking even longer because of the need for various high-end tools and materials.Nonetheless, there are several troubling conclusions from the report. The first is that it’s now a matter of “when, not if” the Chinese threat solidifies, with potentially a fifth of ASML’s sales and operating profit at stake. The second is that this competition (whoever it is) will have deep pockets and Beijing’s geopolitical heft behind it, as flagged by the Dutch company in its annual report under the heading: “We face intense competition.”The final conclusion is that the very strategy currently championed to curb this competition — US-led export controls that block ASML from selling its most advanced models into China — has only hastened its arrival. Restrictions and blacklists have made rivals such as Shanghai Micro Electronics Equipment Group Co. look indispensable to Beijing.“This is the classic problem with technology wars,” Enrique Dans, innovation professor at IE University, tells me. “They work for a while, but they teach the adversary exactly what it needs to become independent from.”More competition in an oligopolistic AI market might not be seen as a bad thing by much of the world, despite the allegations of whether China-made chips end up in Iran or elsewhere. And one could also argue that ASML, like those jet-engine makers, probably has the talent and capital to stay at the frontier of a technology it has mastered over decades. .Yet for Europeans trying to carve out a slice of the technology pie that’s not already claimed by Washington or Beijing, this all comes at a bad moment. ASML has long been the continent’s best asset in making sure it has some leverage in any disputes about access to chips and chip technology — or even to the best AI software models, with the Trump administration more and more willing to weaponize their availability. Europe lags the US and China in terms of foundational AI models, adoption of the technology and playing host to the most promising AI companies. It also accounts for a barely visible share of ASML revenue, with most chipmaking happening elsewhere. The emergence of the company’s Chinese rivals may put even Europe’s meager tech-industry influence at risk, making it easier for the US to bully it into adopting more self-harming export curbs. Rather than conceding further ground, European Union officials need to make a more serious effort to foster and defend a genuine chip ecosystem with ASML at its core. The bloc already has plans to corral €120 billion ($137 billion) of investment into the sector by 2035, which is a start. .Read more:.ASML orders beat estimates as AI investments drive demand.The surge in global AI spending has lifted many local boats, from Germany’s Infineon Technologies AG to Intel Corp.’s upgraded facilities in Ireland. But European chipmaking is too fragmented and occupies niches that could themselves be exposed to a more technologically self-sufficient China.Firms should be encouraged to merge and investment channeled toward cross-border champions, as suggested by Mario Draghi’s EU competitiveness report. More research spending and better protection of key suppliers — optics specialist Carl Zeiss AG, for one — would help. ASML’s tech is difficult, and so is the geopolitics of getting all of this right..© 2026 Bloomberg L.P..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

ASML's China problem couldn't have come at a worse time: Lionel Laurent

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