Key takeaways
Chinese scientists have completed a prototype machine capable of producing advanced semiconductor chips in a high-security Shenzhen laboratory, marking a significant step in the country's effort to achieve independence from Western technology despite years of U.S. export restrictions.
The extreme ultraviolet lithography machine, completed in early 2025 and now undergoing testing, fills nearly an entire factory floor and was built by a team of former engineers from Dutch semiconductor giant ASML who reverse-engineered the company's technology, according to two people with knowledge of the project who spoke to Reuters.
Massive state-coordinated effort spans thousands of engineers
The project falls under China's semiconductor strategy overseen by Ding Xuexiang, a close associate of President Xi Jinping who heads the Communist Party's Central Science and Technology Commission.
Chinese electronics giant Huawei plays a central coordinating role, managing a network of companies and state research institutes across the country involving thousands of engineers.
Sources familiar with the effort described it as China's version of the Manhattan Project, the U.S. wartime initiative to develop the atomic bomb.
"The aim is for China to eventually be able to make advanced chips on machines that are entirely China-made," one person with knowledge of the project said. "China wants the United States 100% kicked out of its supply chains."
The Changchun Institute of Optics, Fine Mechanics and Physics at the Chinese Academy of Sciences achieved a breakthrough in integrating extreme-ultraviolet light into the prototype's optical system, enabling it to become operational in early 2025, though the optics still require significant refinement, one source said.
Reverse-engineering operations and talent recruitment
A team of approximately 100 recent university graduates focuses on reverse-engineering components from both EUV and DUV lithography machines.
Each worker's desk is filmed by an individual camera to document their efforts to disassemble and reassemble parts. Workers who successfully reassemble a component receive bonuses, according to sources.
The Changchun Institute advertised significant financial incentives to attract talent, offering salaries with no upper limit to PhD lithography researchers, along with research grants worth up to 4 million yuan ($560,000) and personal subsidies of 1 million yuan ($140,000), according to a March recruitment posting on its website.
Huawei employees assigned to semiconductor teams often sleep on-site and are barred from returning home during the work week, with phone access restricted for teams handling more sensitive tasks.
"The teams are kept isolated from each other to protect the confidentiality of the project," one person familiar with the operations said. "They don't know what the other teams work on."
Technical challenges remain despite progress
EUV machines use beams of extreme ultraviolet light to etch circuits thousands of times thinner than a human hair onto silicon wafers, a capability currently monopolized by Western companies.
Until now, only ASML has mastered this technology. The company's machines, which cost around $250 million each, took nearly two decades and billions of euros in research and development to perfect.
Jeff Koch, an analyst at research firm SemiAnalysis and a former ASML engineer, said China will have achieved meaningful progress if the light source has sufficient power, reliability, and doesn't generate excessive contamination.
China's prototype is significantly larger than ASML's machines to enhance power output, though it remains crude in comparison.
The Chinese model faces challenges in acquiring optical systems from Carl Zeiss AG, a key supplier for ASML's advanced lenses.
International banks regularly auction older semiconductor fabrication equipment, and auctions in China sold older ASML lithography equipment as recently as October 2025, according to listings on Alibaba Auction.
Huawei, the State Council of China, the Chinese Embassy in Washington, and China's Ministry of Industry and Information Technology did not respond to requests for comment.
The Changchun Institute of Optics also did not respond to inquiries.
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