Huawei invests in lithography chipmaking equipment to boost domestic supply chain

Huawei is doing something most tech companies never attempt: building the machines that build the chips. The Chinese telecom giant has been investing in domestic manufacturers of deep ultraviolet (DUV) photolithography equipment, the critical tools used to etch circuit patterns onto silicon wafers, while simultaneously coordinating a sprawling network of suppliers, fabrication plants, and equipment makers to create a more self-sufficient Chinese semiconductor supply chain.

The effort effectively makes Huawei the central node in China’s push to develop its own lithography capabilities, a role that analysts at Bernstein have described as “project manager” for the country’s DUV initiatives.

The plan: 12 machines and a very long to-do list

Shanghai Yuliangsheng is leading the manufacturing push, with a target of producing 12 advanced DUV units by the end of 2026. Those machines are already being tested at production sites belonging to Semiconductor Manufacturing International Corporation (SMIC), China’s largest contract chipmaker, and at Huawei’s own facilities.

For now, the DUV systems are being aimed at simpler chip designs. The longer-term ambition is to develop capabilities suitable for advanced artificial intelligence applications.

To fill gaps in the domestic supply chain, Huawei has made targeted investments in companies like Qiqi Photon and Keyihongyuan, which are working on two of the most technically demanding components in any lithography system: projection lenses and high-power light sources.

Zeiss lenses from Germany continue to be used in DUV systems even as China tries to develop domestic alternatives.

Why Huawei is building its own road

The US has imposed increasingly stringent export restrictions on cutting-edge semiconductor manufacturing equipment, particularly extreme ultraviolet (EUV) lithography tools made by Dutch firm ASML. Those machines have been off-limits to Chinese buyers for years, limiting domestic foundries like SMIC to manufacturing processes around the 7nm-class.

Huawei’s motivation is partly about its own product line. The company has been ramping up production of its Ascend series AI chips, with targets of around 600,000 Ascend 910C units by 2026. Manufacturing at that scale requires reliable access to fabrication equipment.

Beyond the hardware, Huawei has also been pursuing architectural workarounds. A technique called LogicFolding is designed to increase chip density without requiring the most advanced lithography nodes.

What this means for the global semiconductor industry

The 12-unit target for 2026 is modest by global standards. ASML alone shipped hundreds of lithography systems in recent years. But if those 12 machines work reliably on SMIC and Huawei production lines, the path to scaling becomes far more plausible.

The persistent reliance on Zeiss optics remains a telling vulnerability. Until China can produce projection lenses of comparable quality domestically, its lithography supply chain will have a German-made bottleneck at its core. Huawei’s investments in Qiqi Photon and Keyihongyuan suggest the company understands this.

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