ASML slides on China chip tool report as BofA calls dip an ‘overreaction’

ASML ↘ 4.37% shares continued to slide on Tuesday after a report that a state-backed Chinese company has begun mass-producing deep ultraviolet lithography machines, but Bank of America ↗ 0.79% told clients the selloff represents an "overreaction" and reiterated its Buy rating on the Dutch chipmaker.

The Catalyst

The sell-off began Monday after The Information reported that a Shanghai-based consortium, incorporating teams from startups like Yuliangsheng Technology, has started manufacturing immersion DUV lithography tools — equipment over which ASML has long held a near-monopoly. The company plans to produce five machines this year and 20 next year for domestic customers including Semiconductor Manufacturing International Corp. and Changxin Memory Technologies.investing+2

ASML fell as much as 6.5% in Amsterdam on Monday, dragging U.S. peers Applied Materials ↘ 7.82%, Lam Research ↘ 7.54%, and KLA Corp ↘ 6.18% down with it.finance.yahoo+1

BofA's Defense

Analyst Didier Scemama called the weakness an "attractive opportunity," reiterating a Buy rating and a €2,452 price target — equivalent to roughly $2,845, implying nearly 72% upside from Monday's close. He described the Chinese threat as "modest," noting that even if China successfully sources 20 domestic tools next year, it would reduce ASML's sales by an estimated €1.4 billion — a "mere 2.4%" of projected group revenue.roic+2

Scemama argued that matching ASML's capabilities requires extreme precision and throughput. "ASML's NXT:1980Fi already delivers 330 wafers per hour," he wrote, adding that "even modest reductions in scanner performance could materially lower yields and increase cost per die."investing

Broader Analyst Consensus

BofA was not alone in pushing back. JPMorgan analyst Sandeep Deshpande called the market reaction "disproportionate," stressing that "producing a handful of immersion DUV tools is not the same as producing tools that can be used for high-volume manufacturing." BNP Paribas analyst Jakob Bluestone framed the development as only a "small negative," noting that global demand for lithography tools far outstrips ASML's supply capacity, making some degree of Chinese domestic production a structural necessity rather than an existential threat.investing

The Chinese consortium is targeting just 5 units in 2026 and 20 in 2027, compared with ASML's roughly 130 DUV systems shipped annually.threads