Recent foreign media reports indicate that since last year, Japanese lithography machine sales to China have also increased significantly, with a year-on-year growth rate of up to 82%, showing that the Japanese lithography machine industry has seized the favorable opportunity to export lithography machines to China in large numbers and seize the Chinese market.

ASML's sales of lithography machines to China are subject to many restrictions, which have been frequently imposed since 2021. In September 2023, it suddenly obtained a license to sell the 2000i lithography machine, which can be used for 7-nanometer processes, to China. As a result, ASML's sales of lithography machines to the Chinese market have doubled for several consecutive months, ultimately contributing 46% of its revenue in Q4 2023.

Analysis indicates that ASML sold 257 lithography machines to China in 14 months, generating revenue of 750 billion yuan, making a substantial profit. However, since the beginning of this year, ASML's license has been canceled, resulting in a significant setback in its sales of lithography machines to China.

ASML's first-quarter financial results showed a year-on-year decline of 21% in revenue and 38% in net profit, indicating that it has suffered a severe blow due to restrictions on its sales of lithography machines to China. Surprisingly, it was the Chinese market that saved ASML this quarter, as global demand for lithography machines is accelerating downwards.

The first-quarter financial results showed that the revenue contribution from the Chinese market to ASML further increased to 49%, indicating that the decline in markets outside China is even more severe than that in the Chinese market. Among them, Taiwan, where TSMC is located, contributed only 6% of ASML's revenue, further aggravating its dependence on the Chinese market.

At this time, Japanese lithography machines seizing the Chinese market may make ASML nervous. Japanese lithography machines mainly compete with ASML in the market above 10 nanometers. Due to their relatively backward technology, they cannot compare with ASML in immersion lithography machines. For many years, Japanese lithography machines have only been ASML's backup.

In terms of mature processes, GlobalFoundries and Taiwan Semiconductor Manufacturing Company (TSMC) have long ceased large-scale purchases of lithography machines. The global demand for lithography machines for mature processes is mainly concentrated in the Chinese market. Due to various factors, only China is still expanding processes above 14 nanometers globally.

Under such circumstances, the Chinese market has instead become the biggest opportunity for Japanese lithography machines, which is the only chance they have to seize market share from ASML. As can be seen from the significant increase in sales data of Japanese lithography machines to China, Japanese lithography machine companies have seized this opportunity.

Japanese lithography machines rapidly seizing the Chinese market will inevitably make ASML nervous, as the Chinese market is one of the few growing markets globally. If Japanese lithography machines seize more market share, ASML will lose more revenue. Since there are no growth opportunities in other markets, ASML is also making efforts. It has replaced a French national as its new CEO, and there are even rumors that ASML plans to relocate its headquarters to France to break the restrictions on exporting lithography machines to China with the help of France's influence.

Nowadays, the Chinese market is like a delicacy, and neither ASML nor Japanese lithography machines will easily abandon it. They are both striving to find opportunities to break the US restrictions and obtain more revenue from the Chinese market, especially as global demand for lithography machines continues to decline. The Chinese market is now like a lifesaver, more important than ever before.