China may be further along in its bid to break the West's chokehold on the most advanced computer chips than Washington expected. Reuters reports that Chinese scientists in a secure Shenzhen lab have built and are testing a prototype extreme ultraviolet lithography machine—the ultra-complex equipment needed to manufacture top-tier chips for AI, smartphones, and advanced weapons. Until now, only Dutch firm ASML has been able to make EUV tools, which are tightly controlled by US-backed export restrictions. The Chinese system, completed in early 2025, can generate EUV light but has yet to produce working chips, sources say.
The project is described by people involved as China's answer to the Manhattan Project, with the goal of eventually making cutting-edge chips entirely on domestically built machines and pushing US suppliers "100%" out of its supply chain. Beijing has quietly spent six years on the effort, pulling together thousands of engineers across state institutes and firms, with Huawei acting as a central coordinator. Key to the progress, sources say, are former ASML engineers who were lured with large bonuses and, in some cases, given fake IDs and new names to work under inside the compound, reverse-engineering ASML's EUV machines. Dutch intelligence has warned that China is using wide-ranging espionage programs to obtain advanced technology.
China still faces steep technical hurdles, particularly in replicating the precision optics supplied in the West by companies like Germany's Zeiss. To bridge the gap, Chinese teams are salvaging parts from older ASML machines and sourcing restricted components from secondary markets and intermediary firms, sometimes involving equipment originally made by Japan's Nikon and Canon, according to Reuters' sources. Beijing's internal target is to produce working chips on the prototype by 2028, though those close to the project see 2030 as more realistic—still earlier than many outside analysts predicted.
For the US and its allies, the breakthrough underscores the limits of export controls imposed since 2018 to keep China at least one chipmaking generation behind. Reuters' sources say that inside Huawei's operation, some engineers sleep at work sites and operate in isolated teams, with restricted phone access. Earlier this year, the Financial Times reported that satellite images revealed that Huawei had rapidly built multiple large facilities in Shenzhen. The company "has embarked on an unprecedented effort to develop every part of the AI supply chain domestically from wafer fabrication equipment to model building," said Dylan Patel, founder of chip consultancy SemiAnalysis.
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