China today made its biggest move deep in the AI stack： it began producing its own chip-making machine and homegrown ASML.
Yuliangsheng， tied to Huawei and SiCarrier， is now mass-producing immersion DUV lithography machines， the tools that make 7nm chips. their first deliveries are this year， to SMIC， the makers of Huawei's Ascend chips， Hua Hong and CXMT， memory manufacturers.
The China AI compute supply chain can be thought of as ASML ： Yuliangsheng -> TSMC ： SMIC -> Nvidia ： Huawei.
SMIC makes 7nm node chips using immersion DUV systems on ASML tools bought before the various sanctions. If the current MATCH Act passes， they can't even be serviced. China desperately needs Yuliangsheng to ramp capacity to increase the domestic compute production， even on yesteryears nodes.
The current machines are equivalents of ASML NXT：1980Di， a 28nm tool that reaches 7nm with multi-patterning， which is 10-15yrs behind frontier. For comparison， the new Vera Rubins are on an EUV 3nm node. And China's still ramping capacity， projecting 20 machines in 2027 vs ~130 DUV/yr and ~45 EUV/yr from ASML.
This also has tons of caveats. They rely on critical parts from Japan. New scanners need 12-18mos of tuning per fab. Yields take a long long time to get right. But China tends to be quite good at manufacturing at scale.
Even though they're far behind on frontier tech， this is a significant milestone to China owning its homegrown AI supply chain. Maybe not in 5yrs， but maybe 10， they're going to mass produce compute that could be quite threatening. With largely better manufacturing abilities and fewer regulatory hurdles to deploy data centers at scale with ample power， this poses a real risk to the balance of global compute.