A Chinese lithography machine yet to officially enter a wafer fabrication facility has already triggered a storm in the capital market, first dragging down the stock price of global lithography giant ASML and then pushing Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. (A-share listed) to its daily trading limit.

On July 27, according to a report from The Information, a Shanghai-based, state-backed enterprise has begun manufacturing domestic immersion DUV lithography machines. The plan is to produce approximately five units this year, increasing to 20 units by 2027. The first batch of equipment is expected to be delivered this year to SMIC, Hua Hong Semiconductor, and CXMT for testing and potential integration into production lines.

Following the news, ASML's stock price plummeted by 8.4%, marking one of its largest single-day declines in recent times. The next day, when the A-share market opened, capital quickly flooded into lithography machine concept stocks. JieZhong Technology surged to its daily limit within just one minute of trading, achieving a "30cm" limit-up. Blue Army Equipment and Wavelength Photonics both locked in "20cm" limit-ups, while stocks including Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd., YongXin Optics, Highley Co., Ltd., and ORIENTAL JIA SHENG all hit their daily upper price limits.

Intriguingly, the foreign media report did not name the specific manufacturer. Whether this batch of equipment can ultimately open the door to commercial production lines remains an unknown variable. However, based solely on the highly indicative labels of "Shanghai," "state-backed," and "immersion DUV," the market quickly identified Shanghai Micro Electronics Equipment (SMEE) and, tracing the equity link, placed Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd., which holds a 10.779% stake in SMEE, at the center of this capital frenzy.

A low-profile, unlisted company that rarely publicly discloses its technological progress, how can it cause a multi-billion dollar lithography giant to pale in comparison and propel a park development enterprise into the limelight? Behind this lies both the 223 million yuan invested by Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. a decade ago and a strategic chess game Shanghai has been playing for over twenty years.

Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. Hits Limit-Up First

The capital market pinpointed Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. through a clear and distinct equity chain. Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. does not produce lithography machines itself; its main business is industrial park development, property leasing, and technology investment. In the past, it was more like the "landlord" of Zhangjiang Science City. Over the years, as its equity holdings in technology companies have increased, it has gradually taken on a new role: an investment platform for the Zhangjiang industrial ecosystem.

Looking back to 2016, a wholly-owned subsidiary of Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd., Zhangjiang Haocheng, invested 223.45 million yuan in SMEE, acquiring a 10.779% stake. Since then, this stake has neither been increased nor decreased. As a key company in the domestic front-end lithography field, SMEE is headquartered in Shanghai and has state backing. Therefore, when the overseas report unexpectedly revealed that "a Shanghai state-backed enterprise has begun manufacturing immersion DUV lithography machines," savvy capital quickly followed this equity link to Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd..

However, the report did not name SMEE, and the company has not publicly confirmed it. In other words, today's limit-up for Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. is still trading on a conjecture. But this conjecture is not without foundation. As early as the end of December 2025, the China Government Procurement Network disclosed a significant announcement: SMEE successfully won a bid for one SSC800/10 step-and-scan lithography machine at a price of approximately 110 million yuan. Following this news, Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd.'s stock price surged over 8% during trading.

The bidding documents show that the equipment requires a resolution not exceeding 110 nanometers and an overlay accuracy not exceeding 15 nanometers. Expert review opinions provided a crucial conclusion: under these specific technical indicators, only SMEE in all of China possesses the R&D and manufacturing capabilities. This hundred-million-yuan order at least proves that SMEE can deliver specific front-end step-and-scan equipment. Rationally speaking, last year's SSC800/10 cannot be directly equated with the immersion DUV mentioned in the current rumors. The former mainly corresponds to 90nm and above process R&D, while the technical level and production line requirements of the latter are much higher.

The old order cannot serve as proof for the new rumor, but it does give the market a glimpse of SMEE's actual equipment capabilities. The investment made by Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. ten years ago was not just a concept-backed equity certificate. Since SMEE is not yet listed, whenever new news emerges about domestic lithography machines, Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd., holding nearly 11% of its equity, always becomes the first button pressed by A-share capital. To understand why this equity is so sought after, we must go back to Shanghai around the year 2000.

Shanghai's Two-Decade-Long "Cold Bench" Investment

During the era of the internet boom and capital chasing quick profits, Shanghai committed extremely heavy resources to the most capital-intensive and slowest-yielding sector: integrated circuits. In 1999, Shanghai proposed "Focusing on Zhangjiang." Subsequently, integrated circuits, software, and biomedicine became the key industries for Zhangjiang's development, with land, capital, talent, and related enterprises concentrating in the park. SMEE was born from this strategic layout.

Founded in Zhangjiang in 2002, the company entered a global high-end lithography machine market already dominated by ASML, Nikon, and Canon. The further one advances into sophisticated processes, the higher the technical barriers and the smaller the space left for newcomers. The difficulty of lithography machines extends far beyond simply shrinking patterns and projecting them onto wafers. During operation, the wafer and mask must move at high speed while the equipment maintains nanometer-level synchronization. An error in any single component—light source, lens, wafer stage, measurement system, or control software—could ruin an entire batch of wafers.

For the newly established SMEE, directly challenging the most advanced equipment was unrealistic. It chose a more pragmatic and remarkably patient survival path: "sustaining the war through war." The company decided to start with areas having relatively lower commercialization thresholds, such as advanced packaging, LED, and flat panel displays. While these devices are incomparable to the most advanced front-end manufacturing, they brought a steady stream of real orders and cash flow, and more importantly, they honed the team's core capabilities in precision motion control, focus leveling, optical systems, and overall machine integration.

Through this approach, SMEE's breakthrough milestones emerged sequentially: in 2009, the first advanced packaging lithography machine was introduced; in 2013, a step-and-repeat lithography machine for the LED field was delivered; in 2015, a high-resolution flat panel display lithography machine was successfully shipped; in 2016, the first front-end scanning lithography machine was delivered; in 2018, the 90nm front-end lithography machine project officially passed acceptance; and in 2022, China's first 2.5D/3D advanced packaging lithography machine was shipped, successfully entering the critical testing and packaging territory for high-performance computing and AI chips. SMEE's development path was not sensational; it even seemed slow. It first established a foothold in areas where it could deliver and generate profit, then gradually and painstakingly encroached upon the core "no-man's land" of wafer manufacturing.

This patience over two decades relied heavily on Zhangjiang's unique industrial ecosystem. After more than twenty years of deep cultivation, Zhangjiang has gathered nearly 700 integrated circuit companies, with an industry scale exceeding 200 billion yuan, contributing half of Shanghai's output and nearly one-fifth of the national total, forming a complete closed loop covering design, manufacturing, equipment, materials, and testing and packaging. A lithography machine comprises tens of thousands of precision parts, and its iteration depends on continuous "feeding" and debugging within real wafer production lines. Only when suppliers, equipment manufacturers, and wafer fabs are physically close enough can engineers locate faults and iterate upgrades in the shortest possible time. From this perspective, the 223 million yuan invested by Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. in SMEE in 2016 was not a coincidental financial investment in a hot trend. It appears more as a natural part of the Zhangjiang industrial ecosystem: the park sets the stage, and the investment platform provides long-term endurance. In this long-term companionship, Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. quietly transformed from a "rent-collecting landlord" to an "industrial shareholder."

A decade of sharpening a sword. Now, a rumor about domestic immersion DUV has suddenly illuminated this long-dormant equity, sitting quietly on the balance sheet, under the spotlight of an excited capital market. However, while equity value can be recalculated by a limit-up in one day, the value of a lithography machine can only be confirmed on the production line.

How Far to Break Free from ASML?

Although not as advanced as EUV, immersion DUV is still a critical piece of equipment in chip manufacturing. EUV, with its 13.5nm extreme ultraviolet light, dominates the most cutting-edge processes and remains exclusively monopolized by ASML. DUV, using 193nm deep ultraviolet light, combined with complex techniques like multiple patterning, also has the potential to extend to more advanced processes. For Chinese wafer fabs, immersion DUV holds particular significance. Under the comprehensive blockade of EUV and restrictions on high-end DUV, once a domestic immersion DUV passes production line verification, it means the local chip industry has finally achieved a breakthrough from 0 to 1 in the most critical bottleneck area.

However, the current gap remains significant. According to the report, the domestic equipment is planned to produce about 5 units this year, increasing to 20 units by 2027. ASML sold a total of 279 DUV systems in 2025, of which approximately 131 were immersion systems. Five units versus 131 units is clearly not on the same scale. The report also mentioned that the domestic equipment still lags behind ASML in terms of performance, manufacturing quality, and reliability. Even after delivery to SMIC, Hua Hong, and CXMT, it will take months of testing to determine whether it is qualified for production lines. Commercial wafer fabs are never driven by sentiment; their procurement decisions are always based on business calculations. They need to see how many wafers per hour a machine can process, whether it will frequently malfunction over long periods, whether it can maintain overlay accuracy during multiple exposures, the lifespan of components, and the speed of repair services. Ultimately, the most critical metric is whether the yield rate and cost using the domestic equipment are acceptable.

Therefore, in the short term, 5 domestic units are unlikely to take many orders away from ASML, let alone shake its dominant position in the global high-end lithography machine market. So why did ASML's stock price fall on the news? The capital market's panic is clearly not about selling 5 fewer units this year; it is about what this "breakthrough from 0 to 1" represents. It means that Chinese wafer fabs now have a "second option" that can be continuously tested, refined, and evolved. The rule for high-end equipment manufacturing is brutally simple: without entering a production line, there can be no iteration. Only when a lithography machine is truly embedded in a real production line can it continuously absorb feedback data from the collaborative debugging of engineers, suppliers, and the wafer fab. The first-generation equipment might be inefficient and unstable, but as long as it remains in place, it holds the promise of improving yield rates and reducing costs. ASML's competitive advantage will not disappear because of 5 machines. But in the Chinese market, a crack may have appeared in a domain where it previously had no rivals.

Shanghai Zhangjiang Hi-Tech Park Development Co.,Ltd. has already given its 10.779% stake a new valuation with a limit-up. For SMEE to make this valuation stick, it must convince wafer fabs to entrust their expensive production lines and precious yield rates to a domestic machine. Whether 5 units can lead to 20, and whether 20 can translate into sustained orders, will determine how far this breakthrough can ultimately go. For domestic lithography machines, the discussion should now move from "can it be made" to "can it be used, and can using it make money." At least this time, the capital market has placed its bet early.