China has achieved a breakthrough in developing technology crucial to the AI boom, overcoming US efforts to limit Beijing’s access to the systems.
China’s chip giant Shanghai Yuliangsheng has started production of deep ultraviolet lithography machines, according to The Information, a tech publication.
These machines, which can reach the size of a double-decker bus, use high-powered lasers to imprint designs on to silicon wafers, which are used to make chips.
Until recently, only Western companies and allies of the US had the capability to produce these machines.
The most advanced versions of the technology have largely been the preserve of companies such as Dutch giant ASML and Japan’s Nikon.
These machines have been cut off from China by US export controls, preventing their production of advanced chips as Washington seeks to slow the development of AI in the country.
Semiconductor stocks plunged on the report. Trading was briefly halted on South Korea’s benchmark Kospi index after it suffered a collapse of nearly 11pc overnight, following a bleak day on Wall Street.
Advanced semiconductors, such as those used in AI chips, rely on minuscule circuits, invisible to the naked eye. They can only be manufactured by directing tiny lasers onto microchip wafers, a process known as ultraviolet lithography.
Xi Jinping, the Chinese president, has made mastering the technology a national imperative in an effort to compete against the US in AI. America’s lead is in part because of China being unable to access the most advanced chips made by tech giant Nvidia.
Jing Jie Yu, an analyst at Morningstar, said China’s tech breakthrough had sparked concern among investors for major semiconductor stocks.
He said: “We believe the market was likely spooked by the progress of China’s chipmaking equipment capabilities, and was worried that this progress would threaten the competitive position of global chipmaking and chip equipment leaders.”
Shares in ASML, Europe’s most valuable company and a leading manufacturer of the technology, fell more than 8pc on Monday. Its rivals ASM International fell more than 7pc and BE Semiconductor dropped nearly 10pc.
Eastern markets fall
Japan’s Nikkei and Taiwan’s Taiex stock markets both sank more than 4pc on Tuesday.
South Korea’s chipmakers Samsung and SK Hynix, which have powered its huge stock market rally this year, each plunged more than 12pc. The two companies have fallen almost 50pc from all-time highs recorded last month. It leaves South Korea’s Kospi index on track for its worst month since 1997.
