AMSTERDAM, Netherlands: China's efforts to develop its own advanced chipmaking equipment are increasing pressure on Dutch semiconductor equipment maker ASML, highlighting how the company is being squeezed by U.S. export restrictions on one side and Beijing's push for technological self-sufficiency on the other.

Reuters reported on July 28 that Shanghai Aishengna Electronic Technology Group, a little-known Chinese state-owned company, is leading an effort to mass-produce domestically made immersion deep ultraviolet (DUV) lithography machines, a key technology used to manufacture advanced semiconductors.

The development rattled investors, sending ASML shares down about 10 percent over two days and wiping more than 60 billion euros off the company's market value. The Information first reported China's effort on July 27.

ASML dominates the global market for DUV lithography systems as well as the more advanced extreme ultraviolet (EUV) machines used to produce cutting-edge AI chips. While China is currently unable to make or acquire ASML's EUV systems, analysts say a domestic competitor in DUV technology could pose a longer-term challenge.

According to The Information, China aims to produce five immersion DUV machines this year and 20 more in 2027 for sale to major domestic chipmakers. That compares with the 131 DUV systems ASML shipped in 2025.

JPMorgan analysts said the immediate impact on ASML is likely to be limited given the relatively small production targets.

"That said, this is another data point in China's equipment self-sufficiency story, and it raises the long-term risk to ASML's China revenue," the analysts said in a note.

Swissquote analyst Ipek Ozkardeskaya said the emergence of a Chinese rival could become a "nightmare scenario" for ASML if it weakens the company's dominance in the DUV market.

ASML said earlier this month that it expects about 20 percent of its revenue, or roughly 9 billion euros, to come from China this year despite U.S.-led export controls that already prevent it from selling its most advanced EUV systems and top-end immersion DUV tools to Chinese customers.

The U.S. Congress is also considering legislation that could further restrict ASML's remaining exports of immersion DUV equipment, the segment China is now targeting.

Sanne van der Lugt, a researcher affiliated with the Netherlands' Leiden Asia Center, said the latest development illustrates how export controls may have unintentionally encouraged China to develop its own alternatives.

"What this shows is that U.S. export controls successfully created a business case for Chinese lithography," she said. "It was not what they were intended to do, but that is the outcome."

Even so, analysts cautioned that developing an immersion DUV machine is only the first step. ASML spent decades refining its technology to improve productivity and manufacturing efficiency, meaning Chinese chipmakers may initially have to accept lower performance from domestic systems. However, Van der Lugt said many Chinese customers may still prefer locally made equipment if they believe future access to foreign technology could be cut off.

"For Chinese customers it may be this or nothing."