Will China conduct a major military exercise around Taiwan this quarter?
What moved
China pursues domestic deep ultraviolet lithography equipment to circumvent export controls on ASML technology; the threat to semiconductor supply chain monopoly narrows ASML's geopolitical moat but remains years from commercial viability.
The market transmission
China's push to indigenize DUV production undercuts the export-control leverage that underpins ASML's strategic position and pricing power. The effort does not immediately disrupt supply; credible DUV substitutes require time, capital and iteration. Markets are pricing this as a multi-year structural erosion of ASML's monopoly advantage, not a near-term supply shock. Semiconductor equipment shares and ASML valuations incorporate this longer-term competitive threat.
What would change this
Export controls work only if the alternative is costlier or slower. China's domestic DUV programs have a long history of delays and technical setbacks. A credible Chinese DUV competitor would take years to reach ASML's yield and reliability; until then, the control regime persists. The market is discounting the risk of loss of monopoly, not the imminent loss of supply.