Global semiconductor stocks plunged on July 28, 2026, as reports emerged that a Chinese state-backed company has begun mass producing homegrown immersion deep ultraviolet (DUV) lithography machines.
The semiconductor sector faced a sharp correction Tuesday, with a Bloomberg gauge of Asian chip shares slumping as much as 7.5%. This marks the steepest decline for the gauge since early March. In South Korea, the benchmark Kospi fell as much as 8.1%, hitting its lowest level since April 20, while memory giants Samsung Electronics Co. and SK Hynix Inc. both dropped at least 9%, according to Moneycontrol.
China’s Domestic DUV Lithography Breakthrough
The primary catalyst for the rout is the reported emergence of domestically developed immersion deep ultraviolet lithography machines in China. According to Reuters, citing a report from The Information, these tools—which print circuit patterns onto silicon wafers—are being manufactured by a state-backed company that remains unnamed due to the sensitivity of the project.
These machines are the most advanced lithography tools available to Chinese firms after restrictions blocked their access to extreme ultraviolet (EUV) systems. The breakthrough provides a critical alternative as the U.S. considers further tightening restrictions on the export and servicing of foreign lithography tools in China.
- Semiconductor Manufacturing International Corp (SMIC)
- Hua Hong Semiconductor
- ChangXin Memory Technologies
Despite the news, the Dutch supplier ASML maintains a technical edge. The homegrown Chinese systems still lag in performance and reliability and require further testing before they can reach full mass production.
Production Timelines and Market Impact
Initial production of these domestic DUV machines will be limited. Reuters reports that approximately five machines will be produced this year, with that number rising to roughly 20 in 2027. China is also reportedly developing a domestic EUV machine, though that project remains at the prototype stage.
The market reaction was immediate and widespread across the global equipment supply chain. ASML shares slipped more than 7%, marking its worst day since June 8.
| Company | Share Price Decline |
|---|---|
| BE Semiconductor Industries | About 8.5% |
| Soitec | 5% |
| Infineon Technologies | Nearly 3% |
AI Infrastructure Fatigue and Circular Funding
While China’s technical progress sparked the selloff, the rout was deepened by growing skepticism regarding the sustainability of the AI boom. Bloomberg reports that concerns over AI-related capital expenditure intensified following a round of AI infrastructure deals from Nvidia Corp. totaling more than $750 billion.
Investors are increasingly wary of circular funding patterns and whether the massive spending on AI infrastructure has outpaced actual returns. This sentiment has created a volatile environment for AI-linked equities, as the market questions if these stocks have run too far.
The intersection of these two forces—geopolitical competition in hardware and financial fatigue in AI software and infrastructure—has left semiconductor investors particularly exposed. The current volatility reflects a shift from pure optimism about AI growth to a more critical assessment of both the supply chain’s vulnerability to Chinese autonomy and the actual ROI of massive infrastructure investments.
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