Shares of the largest manufacturers of lithographic equipment fell after a U.S. Congressional report revealed that Chinese companies had imported chip-making equipment worth $38 billion. The report also weighed on Dutch firm ASML, whose securities declined by more than 5% intraday. Nevertheless, the semiconductor market remains constrained by the fragmented Western policies and China’s growing technological ambitions.
The report’s release triggered short-term volatility in ES futures, prompting a slight pullback driven by profit-taking in the tech sector. Investors viewed the investigation as a potential signal for tougher sanctions on Chinese chipmakers, which could trigger ripple effects across the global supply chain. However, the decline remained limited, and the market maintained an overall upward trend due to the steady demand for AI and computing infrastructure stocks.
ASML, along with American Applied Materials, KLA, and Lam Research, have generated substantial revenue from supplying equipment to Chinese companies, including state-owned enterprises. At the same time, none of these sales violated export controls; rather, the issue lies in inconsistent export policies among the U.S., the Netherlands, and Japan, which have enabled China to boost purchases despite sanctions.
The volume of purchases by Chinese companies surged 66% compared with 2022, when pressure was extremely high, accounting for 39% of the total revenue of the five largest suppliers of lithographic equipment. U.S. lawmakers argue that these shipments significantly strengthened the position of the Chinese semiconductor industry and undermined the effectiveness of the sanctions policy. Congress is now calling for a unified approach with its partners to address the loopholes in export regulations.
Even with restrictions, China remains the largest source of revenue for Western equipment manufacturers. In particular, ASML received about 35% of its revenue from China in the second quarter, which is the same as from Taiwan. While EUV lithography systems remain off-limits, less advanced DUV installations are still available to Chinese customers. This allows China to continue developing its own technologies, albeit with some technological delay.
At the same time, Beijing is increasing domestic investments in the semiconductor ecosystem. From 2015 to 2025, China has invested $30.25 billion in startups focused on chip design and manufacturing, representing more than half of the global totals. The country accounted for 640 new companies and 1,130 investment rounds, making it the absolute leader in terms of the number of participants and the scale of investments.
For comparison, the United States has funded startups worth $11.4 billion over the same period, while South Korea has funded $1 billion. Moreover, average Chinese project investment reached a global high of $671 million. These figures indicate that, despite external pressure, China is developing a self-sufficient technology ecosystem that may ultimately reduce its reliance on imported equipment.
Amid growing supply-chain tensions and Washington’s attempts to build a sanctions coalition with the Netherlands and Japan, it becomes evident that the technology race in the semiconductor sector is evolving into a sustained technological rivalry. China is investing not only in equipment, but also in engineering personnel, architecture, AI chip design, and production localization. The West, in turn, risks triggering a reverse-dependency effect, where restrictions stimulate the technological independence that they are meant to restrain.
