The Lithography Lever

The case for cutting China off from DUV

Why should you care about lithography exports sold to China? What is Congress thinking about doing about it? And what does it mean for the future of humanity, the lightcone, great power relations — all of the above.

Nick Brown is a co-founder of the Center for Technology and Statecraft (CTS), a new think tank spun out of IFP, that looks at long-term technology challenges and opportunities facing the US. Nick was a physics major, spent a while as a software engineer in and around government, and had an arc as an aspiring concert violinist. But we’re here to talk about what is in pole position for my paper of the year: his master class on what would happen if the US cut off DUV exports to China: DUV Immersion Lithography: The Foundation of US AI Compute Advantage. Co-hosting is ChinaTalk’s Aqib Zakaria.

We discuss:

• The case for banning DUV exports to China: Why lithography is the hardest part of the semiconductor manufacturing stack for China to replicate/indigenize and the strongest point of leverage the US and its allies have over China’s future AI compute.

• The cannonball-sized hole in US export controls: China imported roughly 90 immersion lithography systems a year in 2024–25, nearly two-thirds of ASML’s immersion exports. If imports continue at this rate, China could approach or even reach parity with the US in AI chipmaking within a decade.

• What the MATCH Act would do: How Congress could close this gap by restricting DUV immersion exports and servicing, and whether the US can get its allies on board.

• Will Beijing retaliate? Why a gradual, long-term restriction may be less likely to provoke another rare-earths crisis

• Buying time for AGI: How cutting off DUV imports could preserve America’s AI compute advantage into the 2030s, giving the US more time to navigate the technological, geopolitical, and societal implications of increasingly powerful AI.

Listen now on your favorite podcast app and check out the MATCH Act’s theme song below.

Compute, Leverage, and the Cannonball-Sized Hole

Jordan Schneider: To set the groundwork: why should we care how much compute China has relative to the rest of the world?

Nick Brown: Compute is one of the fundamental drivers of AI capability. There’s compute, algorithms, and data, and a decade of work by many people has established that of those three, compute is the most governable — the one where it’s most possible to intervene and shape where it goes. Those factors combine to create AI capabilities, both in training and in deployment, and those capabilities get realized in some context: economic, governmental, security-related. If you care about the exercise of AI capabilities, which many do, and about the degree to which China can exercise them relative to the US, then compute — the number of chips, their quality, the aggregate computational stock available — is one of the fundamental levers you’d want to examine or push on.

Jordan Schneider: Let’s do the tale of the tape as of October 2026. Aqib, how much compute does China have, and how much does the rest of the world have?

Aqib Zakaria: Everyone’s numbers are hazy, but at the median estimate, the US has a commanding lead. Measured in H100 equivalents, China has maybe around a million, and the US has upwards of thirty million.

Jordan Schneider: With asterisks — remote access, right?

Aqib Zakaria: Yes. That’s roughly one million Chinese-designed chips in China. But when Nick Corvino and I ran the numbers, there’s almost another million in remote-access compute China can reach in data centers in Thailand, Malaysia, and elsewhere in Southeast Asia. Which goes to show how hard this is to measure.

Jordan Schneider: So in a worst case, we’re still at a 10x advantage as of fall 2026.

Nick Brown: There are three segments: remote-access chips, exported chips, and China’s indigenously produced chips. The chip export wars continue to rage — H100, then H800, then H20, then H200 — but I’d segment all of that from indigenous production. The difference between the three categories comes down to leverage.

For remotely accessed chips, there’s a lot of leverage, and even within that category you might distinguish chips accessed in the US from those accessed elsewhere. The US, its companies, and entities that answer to it as a sovereign have enormous leverage over how that compute is used; they could cut it off at any moment. For exported chips, there’s leverage at the point of export. Once you decide to export, you let go of that leverage, but production remains within your grasp. For indigenously produced chips, there is very little leverage. If China can make its own chips with its own supply chain, as many as it wants, the compute chokepoint stops being an effective governance tool—at least for shaping international power. That is why it’s so critical to look at China’s indigenous production while we debate how many chips to export.

Aqib Zakaria: So we already banned EUV. Why isn’t this a solved problem? What’s the deal with DUV?

Nick Brown: EUV and DUV are two technology generations: extreme ultraviolet and deep ultraviolet. We’re not extreme, we’re just deep. EUV gets all the press, and in many ways it should — by many measures it’s the most advanced technology on the planet, and individual machines sell for hundreds of millions of dollars. But DUV machines, which still go for $60–80 million, are extraordinarily powerful pieces of technology. The most advanced DUV systems are certainly capable of manufacturing advanced AI chips. China’s current flagship AI chips are Huawei’s Ascend line, manufactured indigenously, and at the nodes those chips use, many DUV systems can support production. Those systems are good enough to facilitate China’s indigenous AI chip manufacturing.

Jordan Schneider: Say we stay on the current path: DUV exports aren’t controlled, and the machines keep flowing into China, where the rest of the world has no leverage over them once they’re installed. Play that movie out five or ten years. Why is DUV so important to the buildout, and where does it leave China relative to the rest of the world?

Nick Brown: Two scene-setting points, then the scenarios.

First: from an export control perspective, lithography is the strongest point of leverage the US and its allies have. That comes down to the fact that it is by far the hardest tool for China to indigenize. You can see that across the industry — lithography tools cost far more than other tools, and ASML’s R&D expenditure is higher than that of toolmakers spread across many product lines. Digging into the numbers, we feel confident that China will not be able to make its own DUV systems good enough to make AI chips, at a scale sufficient to really expand its chipmaking, until into the 2030s. That adds up to a very large point of leverage.

Second: there are many generations of DUV systems, from ASML’s most advanced to the earliest ones from the 2000s. The version we currently allow into China — the NXT:1980i, for the nerds — is good enough for 7nm logic and HBM2E, maybe even some HBM3, which is what Huawei’s chips use. Those tools contribute to AI chip production through various channels inside China. China has very astutely recognized that we have a big hole in our export controls — it’s not really a loophole, we’d call it a cannonball-sized hole — and has taken advantage of it, importing a staggering number of systems. We estimated the entire installed base and the rate of imports: about ninety systems per year in 2024 and 2025, worth over ten billion dollars, close to two-thirds of ASML’s entire immersion DUV exports.

Modeling China’s Lithography Ceiling

Nick Brown: Right now the US is dramatically ahead of China in chipmaking and compute capacity. That’s because China is constrained by a number of things — not just lithography, but etch, deposition, and other SME restricted by US controls. But there’s good reason to expect China to indigenize those other segments over time. Litho is almost certainly the hardest and the last tool they’ll develop. So we estimated China’s lithography-bounded capacity: assuming they do indigenize etch and deposition, what chipmaking capacity does their current stockpile of lithography systems enable?

Two high-level findings. First, their current stockpile, which is enormous because our export controls haven’t been tight enough, is nonetheless physically incapable of matching US AI chip production through 2035. Even if they diverted every system to their most advanced fabs and spent 100% of that capacity on AI chips — not a single smartphone — at the basic level of physics and lithography throughput, they’d be well below US production, something like a tenth of it.

Second, if they continue importing at the 2024–25 rate, the picture changes. I’m not saying they’re guaranteed to catch up or surpass, but the curve bends upward. There are scenarios in which US production tapers off, China’s accelerates, and China makes a concerted effort to prioritize AI, where you could be looking at near parity, maybe even parity, in ten years. At the highest level, this is the difference between an essentially guaranteed advantage and, at minimum, a much smaller advantage with real uncertainty about the structure of the overall computational equilibrium.

Aqib Zakaria: Everyone should read the report; the graphs are very pretty. Two questions. First, how should I weight the probabilities? There are a couple of variables — that they keep importing at this pace, and the share they dedicate to AI chip production. Is this a 1% scenario, or something that should keep policymakers awake at night? Second, if this is gradual, when is the right time to strike?

Nick Brown: First, I’d push back on the implicit binary of “beat the US / not beat the US.” The right frame is relative chipmaking advantage. It’s not that if China makes one chip more than the US, everything changes — that’s not how it works computationally, and certainly not for strategy and national power. But the ratios at which chips can be made do matter.

On the modeling, I’d emphasize again that these are lithography capacity bounds. We think they’re informative because China will indigenize the rest of the supply chain eventually, almost certainly before litho.

Jordan Schneider: If you think they won’t indigenize everything, or will do it worse, or yields will only be so good — don’t we get a whole discount factor before we even reach the list of reasons to feel better about selling these machines?

Nick Brown: It depends on the timescale over which you want to feel better. Lithography systems are used for many years after they’re sold. In the next year or two, China is primarily limited by deposition and etch and other SME where we’ve done a better job of controlling. But over the mid to long term — three to ten, three to fifteen years — it’s not tenable to assume China will fail to indigenize etch and deposition. They are making progress. CSET has a very good set of reports from 2025, updated this year, showing inroads in etch, deposition, CMP, and many other segments. The one segment where they have zero percent market share is lithography, and they continue not to obtain meaningful share. So in the near term, treat these bounds as useful information rather than a projection. Over ten years, you have to take them seriously. In the US, we expect production into the 2030s to be at least partially limited by EUV — there have been some good podcasts on that.

On the scenarios, there are three factors. One is how much they import: the same pace, less, or slightly more. If we take as a premise that AI will become more and more important — not unreasonable in fall 2026 — it’s not crazy to assume they modestly ramp up, even though the 2024–25 pace was high and partly driven by stockpiling. Within China, there’s the question of what fraction of machines are dedicated to AI, which depends on what fraction sit in fabs capable of making AI chips — SMIC and CXMT — and, within those fabs, what fraction make AI chips versus other advanced chips like smartphone processors.

We break out a “current trends” scenario, which assumes the allocation we estimated in our installed-base work continues: roughly the same fraction going to advanced fabs, and the same fraction within them going to AI. Then there’s an “AI push” scenario: China decides AI is truly at the top of every list. It’s already a national priority in many ways, but as anyone who has worked in government can tell you, there are different levels of urgency depending on how bought-in leaders are. The AI push assumes China reaches the AI allocation we forecast for the ecosystem outside the US. If they keep importing at or slightly above recent rates and reach that allocation, you start to see potential overlap or near parity in US and Chinese chipmaking.

What the MATCH Act Does

Jordan Schneider: There’s legislation that purports to deal with this. ChinaTalk listeners will be aware of the Trump administration’s reluctance to act on its own, so over the past year Congress has come into the breach with bills that the Commerce Department could implement tomorrow but hasn’t. Enough senators and congresspeople are annoyed about that to pass bills with strong majorities. Nick, what is the MATCH Act, and how does it relate to DUV immersion lithography and bending the cones of the future in ways that advantage the West?

Nick Brown: The MATCH Act is a bipartisan, now bicameral bill dealing with exports of semiconductor manufacturing equipment, including but not limited to DUV immersion lithography. It’s in the Senate version of the NDAA, so it’ll be discussed in NDAA conference over the next couple of months — always a hectic and Byzantine process.

Separate what it seeks to accomplish from how. On the what: it enhances controls on SME in two buckets. The first is the really good stuff — the “big bad SME” — and notably that includes DUV immersion lithography, plus a few other categories of extremely capable tools. For those, MATCH seeks to ensure the US and its allies place countrywide controls. In export control land, there are two ways to control an item. One is to control it to the entire country, preventing it from entering China at all. The other is to allow it into the country but restrict it from specific entities — it can go to China but not to SMIC, CXMT, or Huawei. For these tools, MATCH elevates the control status from entity-restricted to countrywide.

The second bucket is actually extremely large — basically all SME — and there the issue is a miscalibration between US controls and those of notable allies, chiefly Japan and the Netherlands. For two specific entities, SMIC and CXMT, China’s most advanced fabs, the US controls all items subject to its jurisdiction, notably all SME. Not a single US SME tool can go to those fabs. That’s not true for Japan and the Netherlands, which control a much smaller set. MATCH seeks to align those controls.

In a very meaningful sense, the countrywide controls are also an alignment: they match controls on allied tools to steps the US has already taken on tools made by its own SME makers. Hence the name.

On the how: the act directs the Commerce Department to negotiate with allies for about 150 days. All else equal, everyone would prefer these tools be controlled nationally, using the authorities of the Dutch and Japanese governments when it’s their toolmaker. That solution is better for a number of reasons. But it’s often hard to get allies to agree — they have their own interests, domestic politics, and economics. So MATCH directs BIS, if negotiations fail, to impose controls unilaterally. BIS has a number of legal mechanisms for this, which it has used before to control both chips and tools — including some of these very tools at various points during the long saga of the Biden administration.

Aqib Zakaria: The MATCH Act does two things: it restricts further exports of these tools to China, and it restricts servicing. ASML and Tokyo Electron engineers are stationed in China to fix tools in Chinese fabs when they break. Is it necessary to restrict servicing too, and how much impact would that have? Or is it enough to stop future exports and let servicing roll, especially since it’s such a large share of these companies’ revenue?

Nick Brown: It’s wise to consider those independently — they have different implications for China’s chipmaking and for the toolmakers. Speaking for myself, the fundamental thing MATCH does, and the most impactful in the long term, is cutting off item exports. Doing only that, even with servicing continuing at some fabs, massively shifts the state of play.

That said, there are already servicing controls that apply at different fabs. The US has very extensive servicing controls; the Dutch and Japanese have substantially less extensive ones. Where I’d draw a distinction, if I were waving a magic wand, is between advanced and legacy fabs. Advanced fabs have an advanced logic or memory node — in export control parlance, 16/14nm logic and below, with an equivalent memory definition that captures about 18nm half-pitch. Those fabs are where AI chips are made; legacy nodes generally aren’t sufficient. It has been US policy, at least so far, not to try to destroy China’s legacy capacity — there’s a whole set of arguments about legacy chipmaking, and some people would like to curtail it, but current controls focus on advanced capacity. So Congress could consider differentiating servicing at advanced versus legacy fabs. That also substantially changes the revenue calculus for toolmakers: if 50 or 70 percent of your tools are in legacy fabs and you can still service those, that revenue comes back. No doubt it’ll be written five hundred different ways in conference, but it merits a lot of thought.

Aqib Zakaria: If we pull servicing from advanced fabs, the biggest source of unclarity in my research has been: what actually breaks down? ASML and Tokyo Electron engineers are there, but they use a lot of Chinese contractors, many of the engineers are themselves Chinese and won’t leave if you restrict servicing, and some replacement parts may be made in China. Does anything break? Does this hamper Chinese production tomorrow? What breaks first, and on what timeline?

Nick Brown: That is a good question, and in a field full of opaque topics, that’s a particularly deep, dark rabbit hole. There are real strategic questions — if all the servicing simply shifts to Chinese contractors, arguably you haven’t done much. In reality, I think there will be impact, though probably not immediately. Every subcomponent has a timeline on which it degrades, and there are different levels: some problems an on-site engineer can fix, some need a couple of spare parts, some require calling headquarters for specialized expertise. For the most advanced subsystems — the light source often comes up, as do the stages and some sensor systems — it’s almost certain you’d see some degradation. I wouldn’t be confident production would stop; I’d probably bet against that. But some degradation in yield and throughput, starting maybe six to twelve months out and continuing over time, is reasonable to expect.

Aqib Zakaria: On implementation: we’re not known for doing things quickly. The current version gives 150 days before full effect. Isn’t that 150 days for China to stockpile — both lithography machines and the parts you just mentioned, so they can service them themselves for much longer?

Nick Brown: Stockpiling is always a risk, particularly when we announce controls many months in advance. Anyone around for the Biden-era controls remembers the famed HBM stockpiling of 2024; there’s a rich history of the phenomenon. Realistically, they will stockpile, and as 2024 and 2025 showed, potentially a lot. I can’t emphasize enough the power of one of these tools. We estimate a single NXT:1980i can produce over a hundred thousand Ascend chips per year, even assuming China’s much worse yields. They’ll probably import tens of these systems, maybe over a hundred, before the act takes effect — particularly because the window can be extended if negotiations continue, and there’s nothing government likes to do more than continue negotiations. It’s really in governmental DNA.

1 = 100,000+ Ascend chips/yr. Source.

But the way to think about MATCH is that it zooms out from the month-to-month discussion of how many chips Huawei will make. It gets at the fundamental chokepoint, the fundamental point of leverage, for a decade. The numbers are bigger, and the impact is bigger. Even if they import fifty or eighty or a hundred, if exports are cut off after that, you’ll see impacts on the ceiling of what they can do, stretching out ten years or more. I’d prefer they not stockpile and that government move faster. But it doesn’t fundamentally degrade what MATCH is trying to do.

Aqib Zakaria: To steelman the argument against you: these machines print a lot of chips, but I have family in Pakistan who use Huawei phones. What about the collateral damage to the non-AI part of China’s advanced semiconductor industry — smartphone chips? And is that a consequence we want?

Nick Brown: It’s true that advanced nodes are used for AI chips and smartphone chips alike, so constraining advanced chipmaking can constrain smartphone chips. But for lithography in particular, we’ve already allowed them to import such a huge stockpile that they have enough for all smartphone demand for the next ten years, for sure. The only thing capable of saturating that litho capacity is enormous AI chipmaking. I’m not saying there’s no impact whatsoever, but the impact only comes if they’re already redirecting vast quantities of chipmaking toward AI and away from consumer devices — which is its own complex issue, and one we may face here too.

Jordan Schneider: Should America care whether Huawei can make chips on the edge?

Nick Brown: If you talk to different policy folks, China’s national ambitions and its consumer companies are intertwined in various ways. But its consumer companies are also legitimately consumer companies — people buy those smartphones to call their parents and grandparents. So there’s a reasonable range of perspectives. My own view is that the technology with the most strategic relevance for the US is AI, so with a limited number of hours in the day, that’s where I’d focus. In the national security community, people who look at how China projects power abroad and enshrines its technology stack abroad will say that plays in too. That’s a lukewarm answer, but I focus on AI.

Aqib Zakaria: To clarify, when you say China is stockpiling these machines, they’re not literally sitting in a warehouse. Are they all in active use?

Nick Brown: In export control parlance, stockpiling often literally means tools sitting in a warehouse waiting for the control to kick in before being dispersed. In this case, we believe these tools are in fabs. That doesn’t mean the capability isn’t available to be redirected toward AI uses, so China’s stockpile is still a relevant concept. But as far as we’re aware, there’s not a huge number sitting in warehouses gathering dust. Definitely not gathering dust — these systems are the cleanest things on planet Earth.

How Would Beijing Respond?

Jordan Schneider: You think it’s a big deal. It’s unclear to what extent the Chinese government thinks it’s a big deal. The strongest argument I’ve heard against this act is that passing it brings back summer 2025: China plays the rare earths card, factories shut down, and the Trump administration finds some way to cave. That would be awkward, because this would be law. Then again, TikTok was banned and we figured that one out somehow. I’ll give my answer afterward, but how do you conceptualize Beijing’s response if this passes?

Nick Brown: Although the TikTok saga did happen, the potential for retaliation is meaningfully lower with an act of Congress. Executive actions like export controls can be done and undone when the president or one of his appointees signs a paper — or, in this day and age, sends an email. With Congress, the game theory changes. At the end of the day, it’s still law. Even if the administration can delay or tie it up, there’s always the chance a new administration comes in and decides to enforce it. It’s substantially less likely to get tied up in the trade balance.

Another point: at least for lithography, this is a mid-to-long-term act. When you zoom out, the impact is substantial, but the import ban is not cratering China’s chip production overnight. Servicing is a different matter, but the item bans aren’t something China feels instantaneously — and there’s nothing like something instantaneous to cause action against a thing that’s going to bite you next week. China won’t feel a bite from the import bans next week, next month, or in many cases even next year. It’s something that grows stronger over time, and because of that, there’s less potential for retaliation. I’m not saying none; I don’t know the mind of Xi Jinping, and there’s a whole industry dedicated to reading the tea leaves. But it’s a very meaningfully different situation from the crossfire the administration found itself caught in during 2025.

Jordan Schneider: My take: anything’s possible, but the big escalations of 2025 were exactly as you say — sharp, acute things with clear focusing effects. One hundred, 150, 200 percent tariffs will focus the mind of an export-driven economy. The 50 percent rule, taking 10,000-plus Chinese companies off the global market for buying various technologies, focuses the mind. A 150-day window with a promise to hopefully get allies on board at some point, under an administration that may or may not be excited about enforcing it, is a long, slow burn. If the play is a fifteen-year one that comes in drips and drabs, you’re not cut off from the tools you already have, and you have the firms’ political economy saying “don’t worry, this will phase in slowly” — then there are a lot of dampeners. What’s the thing you put on the bridge of a violin?

Nick Brown: A mute.

Jordan Schneider: A lot of mutes. Plus there’s going to be so much other noise. This will pass right as Xi and Trump are meeting, and if that moment doesn’t happen, we’re likely to have a change of control in Congress. I’d put a high probability on this not triggering trade war 3.0. Honestly, it would be embarrassing: if you’re the Chinese government, and this one thing might be controlled in three years, after Xi has spent years giving speeches saying we need to indigenize — I think the story Beijing told itself about importing Nvidia chips repeats here. “You don’t want to sell them to us at some point in the indefinite future? Fine. We’ll figure it out. We’ve got a crack team of engineers, we’re stealing ASML blueprints, see you on the other side.” As opposed to throwing down the gauntlet and forcing Trump to cave on something hard to cave on when it’s law.

Indigenization, Thresholds, and AGI Timelines

Nick Brown: Hanging over the entire DUV issue is the fundamental question of when China indigenizes its own DUV. We think they’ll indigenize etch, deposition, metrology, CMP, and the other segments before lithography. But at the point where they can make tons of litho systems, the strategic dynamics change and there’s much less ability to direct things.

Indigenization is hard to forecast because it’s a serial scientific, technological, and industrial process — figure out one thing, then another, then combine them. China will probably believe it can indigenize fast, and its domestic companies will certainly say so. But we feel confident they will not indigenize litho at a scale sufficient to substantially expand chipmaking until into the 2030s. There are several stages: mastering the technology enough to produce a prototype; converting that prototype and qualifying it for commercial production; and scaling commercial production to high tens or a hundred systems per year.

Right now, we find China has 340 ASML litho systems in the country, split between advanced and legacy fabs. It’s a shame we let that many flow in — in retrospect, a strategic loss. But it also means that to really move the needle, indigenous production of five, ten, or twenty systems doesn’t do much. Our modeling includes indigenous production starting as early as 2030. I’ve also run the numbers for what you might call hyper-aggressive indigenization: China announces a 7nm-capable prototype, an NXT:1980i equivalent, next year, far faster than ASML did; achieves commercial production the year after; and scales 100 percent year over year, faster than at any point in the US-allied litho ecosystem. Even then, China’s existing stockpile plus indigenous production doesn’t come close to US-allied production.

The fundamental conclusion holds even under indigenization scenarios so aggressive they aren’t in the report: if you cut off imports, you close the door on anything approaching US-China parity. It is a button that lets you win the AI competition, at least as measured by chipmaking. If you keep letting imports flow, that guarantee is just not there. It’s a very different strategic situation.

Aqib Zakaria: There are three questions you have to answer to decide whether you support MATCH. One is how quickly they indigenize. Two is your bar for feeling comfortable — I agree it’s not one chip ahead or behind, but if we’re outproducing 30-to-1, I feel comfortable; if it’s 2-to-1, do I? Three is AGI timelines: the MATCH Act doesn’t hit right away, but if you think the singularity is tomorrow, maybe you want something that does.

Nick Brown: On the US-China advantage: in the long term, when you’re looking at tens or hundreds of millions of chips, there are many intersections with strategic issues. There’s the direct national security question — cyber, direct military use. There’s the balance of power around the world and the norms and laws governing advanced computing, especially insofar as the US and potentially China export chips or host data centers abroad. Having the productive capacity to determine something about how those chips are used is a diffuse but, in my view, extremely significant factor.

In a political-economy sense, there’s also a domestic question. If we accept the premise that AI will induce large changes in society, then the tech industry will talk about beating China, but there’s a question of beating China to what, and what outcome we seek as a society and as a governing entity. Having time to engage with that issue, both in the military and national security context and domestically, since this is a dual-use technology, without a rival great power breathing down your neck — there are real benefits to that.

Aqib Zakaria: And the threshold question? It feels like it’s all vibes — there’s no specific number, and it depends on so many assumptions about how they allocate compute.

Nick Brown: There is no magic number. Two frames for compute capability are advantage versus thresholds: relative advantage — if China has one chip, how many does the US have — versus the absolute number of chips and the absolute capability they provide. Realistically you have to engage with both. I can’t point to a number and say at 49,999,999 we’re good and we’ll call it a day.

On AGI timelines and the pace of progress: the import ban’s impacts are realized over a three-to-ten-year timeframe. Servicing impacts will probably emerge sooner, over the next one to three years. AI progress has been very fast, and lots of people expect faster progress. Insofar as that happens, the strategic situation wouldn’t be substantially impacted by the import ban alone — but in those worlds, lots of other crazy things are happening and many other options are on the table. Impacts of AI progress are tougher to predict at specific points in time than the emergence of specific capabilities. As a governance community, the US government should still, even in this day and age, think long term. From that perspective, the impacts of MATCH are pretty undeniable.

Allies, Light Sources, and the Political Economy of MATCH

Jordan Schneider: Aqib, what’s your initial read on MATCH applied to the Japanese deposition and etch side of the equation?

Aqib Zakaria: In some ways MATCH makes more sense for lithography, and in some ways more sense for deposition and etch. America has no lithography companies, so it feels unfair to impose this on the Netherlands. But we do have deposition and etch companies, and we’ve handcuffed our own with the expectation that Japan would follow suit, and they haven’t. There’s a fairness argument.

Jordan Schneider: Aqib, fair’s got nothing to do with it. There’s just less cost to the American taxpayer.

Aqib Zakaria: Well, I care about justice. The other point, which I agree with Nick on, is that China seems much more able to indigenize deposition and etch, so the impact is unclear — it won’t choke the Chinese chip industry the way revoking lithography would. And I feel a similar opaqueness about what happens to servicing and parts. Any reads, Nick?

Nick Brown: What you’re getting at is how these lithography controls compare to the controls that already exist on deposition and etch, which is quite relevant to the political economy of MATCH. The branding, and in many ways the impact, is aligning allied controls with US controls. For the entity controls, the US controls everything and the allies control a small set, so MATCH levels that up. But even the countrywide litho controls are, in a meaningful sense, an alignment action. Litho is made by ASML of the Netherlands, with a small sliver by Nikon in Japan, but the US has demonstrated many times that it’s willing to control such tools countrywide — including in the initial October 2022 controls, when alongside the chip controls the US hit, I think, eleven deposition tools that at the time only US toolmakers, mostly Applied Materials, could make. It did that unilaterally, without asking allies to follow. Across deposition, etch, and metrology, there are many US tools with the same profile as the NXT:1980i that are controlled countrywide. The Dutch have reportedly been more resistant to doing the same for lithography. So the countrywide controls bring litho — the most advanced, highest-leverage chokepoint — up to the level the US has already imposed many times on its own toolmakers, at their cost. It’s fundamentally a matching action.

Aqib Zakaria: Maybe allies follow suit of their own accord, or maybe things get ugly if we use the FDPR. My intuition is that this is an easier pill for Japan to swallow, because of competing company interests within Japan — MATCH is probably good for Kioxia, or for Rapidus, if they’re doing anything. There are countervailing balances. For the Netherlands, it just seems bad for their economy.

Nick Brown: One thing that’s very important about the political economy of MATCH, and not necessarily true of bills that hit chip exports, is that it’s in general fantastic for US and allied chipmakers. These litho systems will be used by Huawei and by CXMT, China’s memory manufacturer, to enable advanced chipmaking that will potentially flood out of China, compete in the global marketplace, and eat into the margins of US and allied chipmakers. Anywhere in the US-allied ecosystem — Japan, but also Samsung and SK Hynix in Korea, and Nvidia, AMD, and Intel in the US — chipmakers stand to gain.

I won’t claim to know Japan’s internal position on MATCH, though I’m sure it’s on their radar. ASML sells the vast majority of immersion tools; Nikon has a very small segment. Depending on where MATCH lands in conference, it might end up controlling other tools where Japan has more exposure, but for DUV, Japan is far less exposed, and it has its own memory manufacturer. I’d bet — not a certainty — that Japan would be more positive on it than the Netherlands.

We also noted in the report that if Japan could be convinced on DUV, even if the Netherlands can’t, the US and Japan jointly can control all immersion systems to China without using the FDPR or any extraterritorial authority. Both have a national company that makes light sources, which are a vital subsystem: Cymer in the US and Gigaphoton in Japan. Every immersion tool has to use one or the other. A national control saying this light source cannot be exported if it’s going into a DUV immersion tool bound for China — MATCH only hits immersion, not all DUV — gives the US and Japan between themselves the power to control all DUV immersion to China.

Aqib Zakaria: But ASML owns Cymer. So that’s just telling ASML its own subsidiary can’t sell to it.

Nick Brown: I’d distinguish selling from exports. Cymer is welcome to sell to ASML for any end use other than, in this notional scenario, shipping to China. Export authority is different from restricting sales. From ASML’s perspective, it’s fair to ask why their subsidiary has to be in the US. But Cymer was in the US well before it was an ASML subsidiary. We had it first.

Jordan Schneider: Fair ain’t got nothing to do with it, Netherlands.

Aqib Zakaria: When people ask me what matters for compute policy, I’m usually of the opinion that we’re 90 percent of the way there, and the thing with the most juice is remote access — plus distillation, RL environments, all these other things. Where does DUV rank on your totem pole for strategic lead over China?

Nick Brown: It depends on the timescale. On anything approaching a long-term timescale, and even a mid-term one, DUV is my golden baby. Not just because of its impact on chipmaking, but because the leverage is the vital point. China may be accessing many chips remotely, and no doubt is, but there are many more levers available to shape that than when China has its own chips. If you’re seeking any form of strategic advantage, or even equilibrium, the foundation of that advantage is indigenous chipmaking, and the foundation of that is lithography. Because I want to think at least in the midterm — five or ten years out, even if not twenty — litho is number one.

Jordan Schneider: I want to come back to how good this paper is. It’s extremely technical about the machines themselves. There’s a legal angle on the different regulatory regimes and how choices play out across countries. There’s a business side on the commercial incentives of every player. There’s industrial competitive analysis of how good the Chinese tools are versus the US ones. That’s an enormous range of domain expertise to internalize. Usually with a policy paper you hope to get one or one and a half of the angles covered in a way that teaches you something. As someone who has been staring at this, albeit from the outside, incredibly closely for six years, learning so much more at a higher level of fidelity was a real treat. Nick, what do you want to tell the kids out there who dream of writing a report as wonderful as “DUV Immersion Lithography: The Foundation of US AI Compute Advantage”? How can they follow your path?

Nick Brown: Thank you, Jordan, that’s very nice. This might be a good opportunity to plug CTS, the Center for Technology and Statecraft, the new think tank I’ve started with a couple of colleagues. We’re six now and may continue to grow. In policy, as in any form of analysis, there’s often a very large gap between getting 80 percent of the way there and getting all the way there, in completeness and fidelity. If people are going to make decisions based on analysis, they want to see everything. Our aspiration at CTS is to give everything we tackle the full once-over. We’re not intending to put out tons of op-eds every week; it’s a place for developing decisive analyses, because our government and society need a lot more clarity on issues related not just to semiconductors but to AI and emerging tech broadly. As for myself, I have a technical background, so that helps.

Jordan Schneider: But you didn’t have a technical background in immersion lithography.

Nick Brown: True. If you’re technical in one area, you can grok some numbers, use those to catch onto other numbers, and then you’re off to the races. But a lot of this did take grinding. One thing about software, which I did in a previous life, is that it’s all visible and inspectable. This is a question about manufacturing processes, which are hidden — happening in fabs, legible to the company doing them, maybe not even to a competitor. We have a full yield model in here, and that took some doing, because yield is extremely closely guarded.

Jordan Schneider: If you could hit anyone with truth serum for an hour to improve this paper, whose secrets would you want?

Nick Brown: This is no form of threat, certainly, but some ASML leadership could be helpful. As far as lithography goes, they are the masters. There’s no comparison — and to bring it back to the theme, that’s why there’s so much leverage available. Almost nobody can match ASML.

Jordan Schneider: Aqib, you were wavering at one point. Has the prodigal son returned to the MATCH Act?

Aqib Zakaria: I need more time to think about it.

Jordan Schneider: The clock’s ticking, man. It’s October 14th. This Congress is ending.

Aqib Zakaria: Gun to my head? Let’s rock and roll, baby. Let’s pass the MATCH Act.