Chinese chipmakers pay triple cost for workarounds
Morgan Stanley estimates CXMT produces one-third the bits per wafer as rivals due to DUV limitations.
By Tyler Khalil ·
Chinese DRAM maker CXMT produces only about one-third as many bits per wafer as Western rivals, according to a June report from Morgan Stanley. The gap stems directly from export controls that block access to extreme ultraviolet lithography machines. As a result, manufacturers must rely on older deep ultraviolet tools that require multiple exposures to print a single layer.
The core issue is a lack of access to the most advanced equipment. ASML is the sole manufacturer of EUV machines, which use 13.5nm wavelength light to print fine features. Analysts estimate the gap between China and the West is at least five years. Without this technology, Chinese firms like SMIC and CXMT must use a technique called multiple patterning to achieve similar results.
This technique forces a steep trade-off in efficiency and cost. Chris Mack, co-founder and CTO of Fractilia, explained that industry wisdom holds that three exposures on a 193 immersion tool cost about the same as one EUV exposure. However, at four masks, EUV becomes the cheaper option. For Chinese manufacturers forced to use four or more steps, the price per wafer climbs significantly.
Quality control presents another challenge. Each new pattern must align precisely with previous layers. More exposures mean more accumulated overlay errors and process variation. Designers can add space around features to compensate, but this enlarges the chip. Mack noted that you do not sell wafers, you sell die, and larger chips mean fewer dies per wafer.
The financial impact is tangible given that wafers cost tens of thousands of dollars. SMIC has managed to produce processors for Huawei without EUV. A 2023 teardown of the Mate 60 Pro revealed a 7nm-class process. More recent analysis suggests SMIC has moved closer to 5nm density, though it still trails TSMC and Samsung. Morgan Stanley calls lithography access a hard ceiling for Chinese memory development.
DUV technology still has some remaining potential. Micron developed its 1-alpha DRAM without EUV by using multiple patterning and tight process control. Mack stated that Micron pushed 193nm tools farther than any other memory maker. Morgan Stanley considers CXMT's planned move to 1-alpha DRAM for HBM3e achievable without EUV. This suggests Chinese firms can still advance within the current toolset.
However, the limit of DUV is approaching. Micron eventually turned to EUV for its 1-gamma DRAM, which delivers more than 30% greater bit density per wafer than the previous generation. Mack said he would be hard pressed to believe a 3nm or 2nm node could be economically viable without EUV. The technology has drawbacks, such as stochastic effects, but it remains necessary for the leading edge.
Chinese chipmakers are not expected to stall completely. They can continue pushing DUV while accepting larger dies, poorer yields, and longer manufacturing times. Morgan Stanley assumes CXMT will stay on 1-alpha without EUV. The bank projects CXMT will lift its share of global DRAM bit supply from 14% in 2026 to 16% in 2028 through new capacity. It also expects China's AI chip self-sufficiency to rise from 42% in 2025 to 70% by 2030.
