China launches DUV lithography production and new AI models, rattling tech markets

State‑owned Shanghai Aishengna Electronic Technology Group announced the start of production of deep‑ultraviolet (DUV) lithography machines, a capability that until last week was limited to the United States, Europe and Japan. The equipment is essential for manufacturing the most advanced semiconductor nodes used in artificial‑intelligence hardware. NATO allies warned that the development could shift the balance of AI‑related chip supply, and the news triggered a sharp sell‑off in Asian markets, closing the Seoul Stock Exchange for two days and sending Nvidia shares tumbling.

At the same time, Chinese AI firms are narrowing the performance gap with U.S. providers. Moonshot AI released the Kimi K3 model on 16 July, featuring 2.8 trillion parameters, a one‑million‑token context window and multimodal capabilities. Independent testing placed Kimi K3 among the top three models in several benchmarks, while its pricing – US$3 per million input tokens and US$15 per million output tokens – is competitive but not the lowest. DeepSeek’s recent releases also rank within a few percentage points of the leading U.S. models, underscoring a shift from cost‑only competition to a broader set of capabilities and data‑control advantages.