Goldman Sachs Claims Chinese Advanced Chip Manufacturing Industry is 20 Years Behind Western Tech

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Chinese Lithography Industry Lagging by Two Decades, Goldman Sachs Reports

Investment bank Goldman Sachs provides a stark assessment of the Chinese lithography sector: it is currently trailing its US counterparts by at least 20 years. Lithography is a crucial aspect of semiconductor manufacturing, serving as a significant bottleneck that impedes China’s ability to produce cutting-edge chips. The most sophisticated lithography machines are crafted by the Dutch company ASML, and due to their reliance on American-sourced components, the U. S.government can effectively prevent these machines from being sold to China.

Current State of Chinese Domestic Lithography Equipment

Huawei, a prominent player in the tech industry, faces U. S.sanctions that restrict its acquisition of chips from Taiwan’s TSMC, directly linked to its relationships with the Chinese military. Consequently, Huawei is compelled to source chips from SMIC (Semiconductor Manufacturing International Corporation).Furthermore, sanctions limiting SMIC’s access to advanced extreme ultraviolet (EUV) lithography equipment confine them to manufacturing chips at a maximum of 7 nanometers.

Importantly, these chips are likely produced using ASML’s older deep ultraviolet (DUV) machines. The domestic lithography sector in China struggles to produce advanced lithography scanners because they require globally sourced components, predominantly from the U. S.and Europe. According to Goldman Sachs, this inadequacy places China’s lithography equipment industry around two decades behind the technological advancements exemplified by ASML.

Chart showing ASML's technology migration from 65nm to below 3nm, detailing lithography models and financials over time from 2003 to 2023. — Image: Ray Wang/X

The Critical Role of Lithography in Chip Manufacturing

Lithography plays an essential role in the chip manufacturing process, as it involves transferring intricate circuit designs from a photomask onto silicon wafers. Advanced machines like ASML’s EUV and High-NA EUV scanners are capable of transferring smaller circuit patterns, thereby enhancing chip performance. After the designs are laid down, they undergo etching and other processes to reach their final layout.

Consequently, the importance of lithography in the precision manufacturing of integrated circuits positions it as the primary bottleneck in chip production. Goldman Sachs reports that the current state of Chinese lithography lagging behind adds considerable time before parity with ASML’s leading-edge manufacturing processes can be achieved.

Competitive Landscape and Future Prospects

Industry leaders like Taiwan’s TSMC are already in production of advanced 3-nanometer chips and are preparing for 2-nanometer manufacturing. Goldman Sachs emphasizes that “It took ASML 20 years and approximately USD 40 billion in R&D investment to develop technology transitioning from 65nm to below 3nm.”Given that Chinese lithography firms remain entrenched at the 65nm level, it appears improbable that they will close this technological gap with their Western counterparts in the foreseeable future.

According to Goldman Sachs, it suggests China’s lithography progress is 20 years behind based on the roadmap position of Chinese companies and ASML.pic.twitter.com/X4Lz5jh7dv

— Ray Wang (@rwang07) September 1, 2025