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April 11, 2025
The Lithography Inflection Point - How Two Different Approaches to EUV Could Reshape the Semiconductor Industry
By
Kristal Investment Desk
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Articles>
The Lithography Inflection Point - How Two Different Approaches to EUV Could Reshape the Semiconductor IndustryRevolutionary Science vs. Strategic Independence in the Battle for Semiconductor Supremacy
In 1965, Gordon Moore, then the director of R&D at Fairchild Semiconductor, published a paper in Electronics Magazine where he observed that the number of components on an integrated circuit had doubled every year and predicted this trend would continue.
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It was a prediction about the pace of progress that semiconductor companies could economically achieve. And the key enabler of that progress was lithography — the process of etching microscopic patterns onto silicon wafers.
Fast forward to today, and that progression faces an inflection point.
ASML, the Dutch company that has effectively monopolized advanced lithography equipment, has pushed its Extreme Ultraviolet (EUV) technology to its current limit of 13.5nm wavelength. But two emerging alternatives — one revolutionary and one evolutionary — are now challenging ASML's approach, with profound implications for the semiconductor industry and the global technology landscape.
To understand the significance of this inflection point, we need to appreciate the journey of lithography technology.
In the early days of semiconductor manufacturing, lithography was relatively straightforward. The industry used mercury lamps to produce light with wavelengths of 436nm (g-line) and 365nm (i-line) to print patterns on silicon wafers. As circuit dimensions shrank, the industry moved to deep ultraviolet (DUV) sources: first KrF excimer lasers at 248nm, then ArF excimer lasers at 193nm.
But wavelength reduction alone wasn't enough. To print ever-smaller features, the industry introduced immersion lithography (using water between the lens and the wafer to increase resolution) and multiple patterning techniques. These were stopgap measures as the industry worked toward the next big leap: Extreme Ultraviolet (EUV) lithography.
EUV represented a fundamental break from previous lithography generations.
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But the EUV journey isn't over. In fact, it's reaching another critical inflection point.
Two radically different approaches to advancing lithography are now emerging:
First, a venture-backed startup called Inversion Semiconductors is pioneering a revolutionary approach using particle accelerator technology. By combining Laser Plasma Accelerators (LPAs) with Free Electron Lasers (FELs), Inversion aims to generate EUV light at 6.7nm — half the wavelength of ASML's current systems — potentially enabling a new generation of semiconductor scaling.
Second, China is pursuing a different path: developing Laser-Induced Discharge Plasma (LDP) technology to generate 13.5nm EUV light. This approach is less about pushing technological boundaries and more about establishing domestic capability in a strategically vital technology currently controlled by Western companies and subject to export restrictions.
These two approaches — one revolutionary, one evolutionary — represent fundamentally different responses to the same challenge and could reshape the semiconductor industry in profound ways.
Inversion Semiconductors' approach represents a genuine moonshot. Their vision is to harness the physics of particle accelerators — traditionally the domain of high-energy physics research — for commercial semiconductor manufacturing.
The technical approach is as audacious as it sounds. Laser Plasma Accelerators use intense laser pulses to create plasma waves that accelerate electrons to near-light speeds over just centimeters rather than the kilometers required by conventional accelerators. These high-energy electrons then pass through a Free Electron Laser, which uses special magnetic structures to make the electrons emit coherent light at precise wavelengths — in this case, 6.7nm EUV.
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But the challenges are equally formidable. Taking technologies from the realm of scientific research to commercial semiconductor manufacturing requires solving immense engineering problems around reliability, stability, cost, and integration. Particle accelerators have historically been massive, complex instruments requiring teams of PhDs to operate — not the kind of equipment that runs 24/7 in semiconductor fabs.
Inversion's bet is that these challenges, while daunting, are surmountable, and the potential rewards justify the risk. If they succeed, they could disrupt ASML's effective monopoly and establish themselves as technology leaders in one of the most valuable segments of the semiconductor equipment market.
China's approach to EUV development presents a stark contrast to Inversion's revolutionary ambitions. Rather than aiming to leapfrog current technology, China is pursuing a parallel path focused on replicating existing capabilities through alternative means.
The Laser-Induced Discharge Plasma (LDP) technology that China is developing combines aspects of laser pre-ionization with electrical discharge to generate 13.5nm EUV light. Interestingly, this isn't a new concept — it was explored in the early days of EUV development before being largely abandoned in favor of ASML's Laser Produced Plasma (LPP) approach, which was deemed more promising for commercial applications.
China's revival of LDP technology is driven not by technological superiority but by strategic necessity. Facing export restrictions on ASML's EUV systems, China needs domestic alternatives to advance its semiconductor industry. Even an LDP-based EUV system with lower throughput or efficiency than ASML's would be strategically valuable in this context.
This pragmatic approach reflects different priorities:
The primary challenge for China's approach is overcoming the same engineering problems that led the industry to abandon LDP in favor of LPP years ago — particularly around power scaling, component lifetime, and debris management. But with sustained investment and strategic focus, these challenges aren't insurmountable, especially if performance expectations are initially modest.
The contrast between these approaches reflects more than just technical choices — it reveals fundamentally different frameworks for addressing technological challenges.
Inversion exemplifies the classic Silicon Valley disruptor model: a high-risk, high-reward venture seeking to create a step-change in technology and capture market share through superior performance. Their approach is predicated on significant venture funding, exceptional technical talent, and the potential for outsized returns if successful.
China's LDP efforts represent a different model entirely: strategic technology development backed by national priority and funded without the same expectations for commercial returns. This model prioritizes achieving baseline capability and strategic independence over market leadership or financial returns.
Neither approach is inherently superior — they're optimized for different objectives. And this divergence points to a broader transformation in the global technology landscape.
For decades, semiconductor technology has advanced along a relatively unified global path. While companies competed fiercely, they generally pursued similar technical approaches, and advancement followed a predictable trajectory guided by industry roadmaps like those from the International Technology Roadmap for Semiconductors (ITRS).
What we're witnessing now may be the end of that era. The emergence of parallel paths in lithography development — arguably the most crucial technology for semiconductor advancement — signals a potential fragmentation of the global semiconductor ecosystem.
This fragmentation is driven by the increasing alignment of technology with national strategic interests. As semiconductors have become recognized as foundational to economic and military power, nations are increasingly willing to invest in independent technological capabilities, even when purely commercial logic might dictate otherwise.
This divergence would have profound implications for the global technology industry, potentially reducing economies of scale, increasing costs, and creating parallel innovation paths with limited cross-fertilization.
The lithography inflection point we're witnessing today will shape semiconductor development for the next decade and beyond. Whether Inversion's revolutionary approach succeeds, China's evolutionary path bears fruit, or ASML maintains its leadership through continuous improvement of its existing technology, the outcome will influence not just chip manufacturing but the entire technological landscape built upon semiconductors.
Several scenarios seem plausible:
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The most likely outcome is probably a combination of scenarios 2 and 3 — some market segmentation along with increasing regional specialization. This would represent a significant shift from the historically unified development path of semiconductor technology.
For semiconductor manufacturers, equipment suppliers, and the broader technology ecosystem, this inflection point creates both challenges and opportunities:
For ASML specifically, both emerging approaches represent challenges to their effective monopoly in advanced lithography. Their response will likely focus on accelerating their own roadmap, potentially exploring alternative light source technologies while leveraging their unmatched expertise in system integration and the ecosystem they've built around their technology.
The question isn't simply which approach to next-generation lithography will win on technical merits. It's about how different incentive structures — commercial versus strategic, market-driven versus state-backed — shape technological development in a domain of critical importance to the global economy and national security.
As the semiconductor industry fragments along these lines, we may see a more diverse and unpredictable innovation landscape. Perhaps that's not entirely bad; biological evolution tells us that diversity often breeds resilience and creates multiple paths for advancement.
But it also means the comfortable predictability of the semiconductor roadmap — the assumption that chips will get smaller, faster, and more efficient at a known rate — may be giving way to a more complex future where geography, politics, and strategic considerations play as large a role in determining technological trajectories as physics and engineering.
For an industry built on the certainty of Moore's Law, that's a profound shift indeed.
Disclaimer: The views in the post are for for informational purposes only and should not be considered as investment advice. Please contact your RM or Kristal.AI for investment advise.
By
Kristal Investment Desk
April 11, 2025
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April 11, 2025
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We are licensed in Singapore, Hong Kong and India. Kristal Advisors (SG) Pte. Ltd. presently operates under the CMS license by the Monetary Authority of Singapore (MAS). Kristal Advisors (HK) Ltd is licensed and regulated by the Securities and Futures Commission (SFC) to carry out Type 4 and Type 9 regulated activities and is not involved in the discretionary management of any collective investment scheme. Kristal Advisors Private Ltd. presently operates as a Registered Investment Advisor under the jurisdiction of the Securities and Exchange Board of India (SEBI).
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