Huawei is playing a central role in China’s initiative to eliminate reliance on foreign technology within its semiconductor supply chain by supporting companies that develop advanced chip manufacturing equipment. The technology giant is actively investing in the industry behind lithography machines, which are essential for producing cutting-edge semiconductors, and facilitating partnerships with leading domestic chipmakers such as Semiconductor Manufacturing International Corporation (SMIC).
A key development in this effort involves Yuliangsheng, a Shanghai-based equipment manufacturer that has co-developed China’s first advanced deep ultraviolet (DUV) lithography machine. The company, which originated from a startup called SiCarrier—reported to have close connections with Huawei, though Huawei has denied such ties—is currently testing its DUV systems with Chinese fabs including SMIC and Huawei’s own production lines. While these machines are initially being trialed with less complex chips, the long-term focus is on producing advanced artificial intelligence chips.
Lithography technology represents one of the most significant challenges to China’s ambitions for semiconductor self-sufficiency. Domestic chipmakers continue to depend heavily on Dutch firm ASML, which dominates the global market for the sophisticated lithography equipment needed to make the most advanced semiconductors. Chinese alternatives still lag in critical components such as high-precision projection lenses and powerful light sources.
Huawei is addressing these technological gaps by backing local suppliers and promoting the adoption of their equipment in commercial fabs. This process requires extensive testing and development before domestic machines can rival established foreign products. Success in this area would reduce China’s vulnerability to Western export restrictions, which currently limit access to the most advanced ASML equipment.
Industry analysts note that Huawei acts primarily in a project management capacity within this initiative, helping coordinate the ecosystem of vendors and customers required to advance DUV lithography technology domestically. Yuliangsheng aims to produce about a dozen DUV machines by the end of 2026 but remains years away from matching the performance and productivity of ASML’s systems.
Recent reports indicate that SMIC is testing a Yuliangsheng machine capable of 28-nanometer processing and using multipatterning techniques to approach fabrication of 7-nanometer chips, although these are still less advanced compared to the latest global standards.
Yuliangsheng has also been collaborating with Shanghai Micro Electronics Equipment to develop multiple DUV prototypes, some of which incorporate foreign components while others test local substitutes. The complexity of DUV machines—comprising tens of thousands of parts and a dozen major component categories—poses a significant challenge for domestic suppliers, particularly in producing projection lenses and light sources.
Currently, Yuliangsheng’s lithography systems use lenses made by German optics company Zeiss, which supplies exclusively to ASML. However, industry sources have suggested these lenses may have found their way into the Chinese market through secondary channels. Huawei’s investment arms, including its corporate venture fund Habo and the fund Shenzhen Yuanzhi Xinghou, are backing local companies working to develop alternatives in critical areas such as ultra-precision optics. Fujian Zhiqi Photonics, a spin-off from Shenzhen-listed Castech, has received substantial backing and produces optical components intended to replace foreign suppliers. Castech is known for manufacturing optical crystals and counts both ASML and Huawei among its clients.
Another persistent bottleneck is the lithography light source, dominated globally by Japanese company Gigaphoton and Cymer, an ASML subsidiary. While technically feasible to produce, stable high-power light sources remain difficult to manufacture reliably, underscoring ongoing challenges for China’s push toward semiconductor autonomy.