China is secretly building an AI chipmaking machine in Shenzhen. How its ‘Manhattan Project’ could change the AI era

China is reportedly building one of the most fundamental components of AI computing: the lithograph machines that make advanced AI chips using Extreme Ultraviolet (EUV) light source technology. According to Reuters and other reports, this high-security research initiative is taking place at a laboratory in Shenzhen. The official target for the project is 2028, and if successful, it could allow China to become self-sufficient in advanced AI semiconductor production. Here is what you should know, and why it matters.

China’s ‘Manhattan Project’ aims to challenge Western dominance in advanced AI chips

The project, dubbed in Western media as China’s own “Manhattan Project” in reference to the US nuclear bomb programme, is intended to enable domestic production of cutting-edge chips used in AI computing, smartphones and defence.

A top state priority under President Xi Jinping, the project comes amid US-led export controls on advanced chips and chipmaking equipment to China. Chinese technology giant Huawei is reportedly coordinating much of the supply chain for the project.

Chinese research institutions are also involved, including the Changchun Institute of Optics, Fine Mechanics and Physics (CIOMP), which has contributed to optical system development.

ASML reverse-engineering? Prototype machine is being tested

A prototype machine was reportedly completed in early 2025 and is currently undergoing testing. Former engineers from world's top semiconductor equipment maker ASML are reportedly involved in the efforts. Lin Nan, a former head of light-source technology at the Dutch company, is among those recruited for the Chinese project, according to the reports. This has led to suggestions that the researchers are drawing on insider expertise and attempting to replicate key elements of ASML’s technology, or even reverse-engineer it.

Note that what is being tested is a light-source prototype rather than a production-ready EUV lithography machine. The system can generate EUV light at the required wavelength, but it has not yet been used to manufacture working chips.

A bulky machine under heavy security

According to Reuters, the prototype occupies almost an entire factory floor and is described by sources as bulky and inefficient compared with ASML’s commercial systems, by far the global leader in EUV lithography machines used for advanced AI chip production.

Security around the Shenzhen project is reportedly extremely tight. The facility operates with compartmentalised teams, isolated work areas, and workers using aliases or false identities to prevent information leaks.

High payments and incentives to those who join Shenzhen project

The importance attached to the project is reflected in unusually generous recruitment packages: very high salaries, multimillion-yuan signing bonuses, housing subsidies, and rare tolerance of dual citizenship in order to attract foreign experts and protect them from potential sanctions.

Major technical challenges remain

Reuters reported that the Chinese government aims to begin producing chips using domestic EUV technology by 2028, although sources close to the project suggest that 2030 is a more realistic timeframe.

According to the report, unresolved issues include precision optics, overlay accuracy, defect control, throughput, long-term reliability, and ecosystem maturity.

China appears to have achieved in roughly six years what took ASML 18 years. But this comparison is misleading. ASML took decades to become the dominant player as it had to build ts expertise from the ground up. China, on the other hand, may be able to accelerate development by building on existing global research and using ASML designs as reference points, supported by massive state funding. It also benefits from skipping much of the foundational scientific research, supplier creation, and multiple failed generations of prototypes that ASML had to endure.

China's advances in AI chipmaking machinery: Why this matters

EUV technology enables the production of transistors thousands of times thinner than a human hair. It's behind the most advanced AI chips and accelerators designed by companies such as Nvidia and AMD and manufactured by firms like TSMC.

China has been blocked from purchasing ASML’s EUV tools, which has pushed it to pursue domestic development of these machines. The eventual aim is to reduce dependence on ASML and other foreign firms for advanced chipmaking capacity.