Exclusive: How China built its ‘Manhattan Project’ to rival the West in AI chips

Oha … China has secretly built a prototype EUV lithography machine, a key technology required for producing advanced AI chips. The machine was completed in early 2025 and is currently being tested in Shenzhen, but it has not yet produced fully functional chips.

Internally, the effort is described as a Manhattan Project-style program: highly state-driven, heavily funded, and conducted with a high level of secrecy. A team that reportedly includes former ASML engineers reverse-engineered critical parts of Western EUV-technology, an area long dominated by the Dutch company ASML..

And Huawei plays a central coordinating role, bringing together infrastructure, research teams, and participating entities. China aims to achieve domestic production of advanced chips roughly between 2028 and 2030, earlier than many analysts had expected. Major technical challenges remain, especially around the extreme precision optics that Western suppliers currently master.

China’s EUV effort shows how strategic pressure and export controls can accelerate domestic innovation, even in areas that were long considered out of reach. At the same time, the project underlines how difficult it is to replicate the full industrial ecosystem behind cutting-edge chip manufacturing. While the gap to Western leaders may be narrowing in some areas, sustained reliability, scale, and production quality remain open questions rather than settled outcomes.

Fun and games, AKA business as usual.

The US and EU have coordinated for years to ‘contain’ China. That means they have restricted China’s access to top tier tech. China responds to this by developing its own tech stack in order to keep the US out of its supply chains.

I have pointed out for years that there is nothing magical about technology. Anyone can roll their own or usually just license what they need to avoid R&D hassles. Until of course you can’t license the latest and greatest then you have to roll your own. At that point you too can play the refuse-license game since turn about is fair play.

I have also pointed out that China innovates much faster than the US and EU. That means that China will catch up sooner and once they catch they will keep innovating and surpass the the US and EU. Once they get one tech generation ahead they can refuse to license their latest and greatest. That in turns means US and EU companies won’t be able to compete on the global stage, after all who wants to buy stuff that is already past its best before date.

One extra note: the wishful thinking behind the 2028 China forecast and the ‘more likely 2030 or later’ bit. I have watched China government forecasts for years and the pattern is clear, China loves to underpromise and overdeliver. So my best guess is late 2026 to early 2027 for deliverables.

As usual, very interesting times.

It’s funny how lithography machine tech is harder to steal than any military secrets.

Good. Let’s hope a significant part of their GDP gets tied up in an AI bubble that produces nothing useful for the vast majority of ppl.