China's EUV gap keeps semiconductor catch-up in check

The U.S. export blockade on EUV tools is forcing China’s semiconductor sector to pursue performance gains via mature nodes above 28nm, yet advanced packaging cannot replicate the power efficiency and transistor density enabled by true scaling. Technically, this accelerates domestic R&D in DUV lithography, high-density interconnects, and chiplet integration—but at the cost of yield volatility and thermal complexity. Compliance risks are mounting for foundries like SMIC, facing soaring maintenance expenses and gray-market dependencies for legacy parts. TSMC and its Taiwan, China-based supply chain are fortifying their sub-3nm moat, while Samsung may expedite U.S. fab expansions to secure regulatory leniency. Over the next 12–24 months, China will likely drown in overcapacity at mature nodes while hitting a hard ceiling in AI/HPC compute, cementing a bifurcated reality: commoditized domestic volume versus externally constrained high-end capability.