Caught Between ASML and China: Nikon and the Emerging Split in the Semiconductor Industry
Original Article By SemiVision Research [Reading time: 15 mins]
From Nikon’s Massive Loss to a New Semiconductor Order: Mature Nodes, Equipment Nationalization, and China’s Rewriting of the Industry Landscape
In 2026, the semiconductor industry’s hottest buzzwords still appear to be AI, HBM, advanced packaging, 2nm, and EUV. But if we zoom out slightly, the developments that deserve the most attention are often not the cutting-edge breakthroughs. Instead, they are the sudden structural cracks appearing in parts of the industry long assumed to be stable or already settled. Nikon is a prime example.
The Japanese equipment giant—once a key player in the global lithography market—has recently issued a materially downgraded outlook. For the fiscal year ending March 2026, the company now expects a net loss on the order of ¥80–90 billion and an operating loss of roughly ¥100–105 billion. This is not merely an ugly set of financial numbers.
It is also a signal of a deeper industry shift: when advanced-node manufacturing becomes effectively monopolized by ASML, while mature-node capacity is increasingly dominated by China, traditional equipment makers that lack a clear strategic position risk being squeezed between two very different worlds.
However, it is important to clarify that Nikon’s massive loss cannot simply be described as a “collapse of its lithography business.” According to Nikon’s financial reports and analyses by credit rating agencies, the largest contributor to the earnings plunge was a significant impairment charge within its Digital Manufacturing segment. This primarily relates to goodwill and intangible assets associated with Nikon SLM Solutions, totaling about ¥90.6 billion. Meanwhile, the Precision Equipment segment is also facing inventory write-downs and weaker demand visibility. In other words, the issue is not a single product line failure. Rather, Nikon is simultaneously experiencing a broader set of structural problems across multiple divisions—a breakdown of its growth narrative, a reassessment of asset values, and the erosion of core competitive advantages.
This is precisely why explaining Nikon’s situation as simply “losing to ASML” is far too superficial. The real issue is deeper:
Nikon did not just lose a product competition—it lost its position within the industry’s entire coordinate system.
Nikon’s Problem Is Not Just Missing EUV—It Is Losing the Main Route of Advanced Manufacturing
The most brutal aspect of the semiconductor equipment industry is that missing a critical technology generation rarely results in a slow, gradual decline. Instead, it often leads to a complete redefinition of a company’s business model.
ASML’s dominance today does not come only from developing EUV technology. More importantly, EUV has become an indispensable piece of infrastructure for advanced semiconductor manufacturing worldwide. As long as companies like TSMC, Samsung, and Intel continue pushing toward smaller nodes, ASML remains a near-mandatory supplier.
Nikon was never entirely lacking in technical capability. In fact, the company was once an important contributor to ArF immersion lithography, and it maintained a meaningful presence during the DUV era. But in the semiconductor equipment industry, it is not enough to demonstrate technical competence once. The real challenge is maintaining long-term alignment with the roadmaps of the world’s top semiconductor manufacturers—turning your equipment from an optional supplier into an indispensable part of the production line.
This is where Nikon ultimately fell short, while ASML succeeded.
As a result, the most profitable and strategically valuable portion of the market—where margins are highest and customer relationships are strongest—became firmly locked in by ASML. Nikon, by contrast, gradually retreated into DUV systems, mature-node manufacturing, and niche applications. Such a retreat does not necessarily mean immediate failure, but over time it erodes a company’s pricing power, technological authority, and credibility with capital markets.
This reveals an important industry logic:
The advanced-node equipment market is not only a high-technology market—it is also a highly monopolistic one.
The mature-node equipment market, by contrast, tends to be characterized by intense pricing pressure, higher substitutability, and much greater demand volatility.
Once a company slips from the former into the latter, both its financial structure and valuation framework are fundamentally rewritten.
Geopolitics Is Not Background Noise—It Has Become the Pricing Mechanism of the Semiconductor Equipment Industry
If this discussion were limited to technological missteps, it would still be insufficient to explain Nikon’s current predicament. What truly accelerated the deterioration is geopolitics.
In 2023, Japan formally joined the coalition imposing export controls on semiconductor manufacturing equipment to China, introducing stricter licensing requirements on 23 categories of semiconductor production tools. At the time, Japan’s Ministry of Economy, Trade and Industry also disclosed that China accounted for roughly 30% of Japan’s semiconductor equipment exports. In other words, this was not a symbolic move—it directly affected one of the most important overseas markets for Japan’s equipment industry.
For Nikon, the situation is particularly delicate. After losing its position in the advanced-node roadmap, China had the potential to become one of its most meaningful growth pillars. In the past, market reports frequently cited Nikon’s own comments that demand in China for its older-generation lithography systems remained strong.
This is entirely logical. Once China’s access to the most advanced semiconductor equipment was restricted, it naturally began expanding production in nodes that could still be supported by available tools—28 nm, 40 nm, 55 nm, and other mature processes. These segments happen to be areas where Nikon still had a realistic opportunity to participate.
But here lies the dilemma: China is both a potential export market for Nikon and its largest future competitive threat.
On one hand, export restrictions make it difficult for Nikon to reliably capture the upside from China’s expansion in mature-node manufacturing. On the other hand, China’s domestic equipment ecosystem is rapidly taking shape, with a long-term objective of gradually pushing foreign suppliers like Nikon—companies that are not at the absolute technological frontier but still possess critical capabilities—out of the supply chain.
As a result, the real impact of geopolitics is not simply the loss of a few equipment sales. It fundamentally alters how companies assess their future cash flows and investment assumptions. When a company can no longer confidently predict whether key markets will remain accessible for equipment shipments, installations, maintenance services, and upgrades, the entire financial model—capital expenditure planning, inventory valuation, service revenue expectations, and R&D return assumptions—must be recalibrated.
The inventory write-downs and impairment charges appearing in Nikon’s financial statements are, to some extent, a financial projection of precisely this uncertainty.
Why China—Blocked from Advanced Nodes—May Be Even More Dangerous in Mature Processes
When discussing China’s semiconductor ambitions, many people still frame the issue around a single question: Can China catch up at 5nm, 3nm, or EUV?
But this perspective has a blind spot. It focuses too much on the tip of the technological pyramid, while overlooking the foundation beneath it.
In the near term, China’s most practical strategy may not be to immediately match the world’s most advanced nodes. Instead, it may seek to reshape the global supply structure through mature-node manufacturing first. According to reports cited by Reuters in March, industry and policy discussions in China suggest that the country already accounts for about 33% of global capacity in nodes of 28nm and above.
This is not a figure that can be easily dismissed.
Mature nodes may not be glamorous, but they are deeply embedded across enormous markets—automotive electronics, industrial control systems, power management ICs, display driver ICs, communications chips, MCUs, sensors, and analog semiconductors. These sectors are vast in scale and serve a broad range of customers. Once supply chains in these segments begin to shift toward large-scale, low-cost, and stable production capacity, the impact can be profound and long-lasting.
What does this mean?
It means China’s rise may not begin with a direct assault on TSMC’s strongest territories—2nm and EUV manufacturing. Instead, it may first secure influence over the global supply of foundational chips, leveraging advantages in volume, pricing, delivery reliability, and policy support within mature-node production.
This shift carries major implications for equipment suppliers.
Unlike advanced-node manufacturing—where investments are concentrated among a small number of customers purchasing extremely expensive tools—the mature-node market is far more scale-driven. It is characterized by cost compression, broader customer bases, and steadily increasing penetration of domestic equipment alternatives.
For Nikon, this creates an especially uncomfortable battlefield. It is not the lowest-cost supplier in this market, nor is it a domestic champion favored by Chinese industrial policy. At the same time, it lacks the kind of irreplaceable technological monopoly that defines the advanced-node ecosystem.
In other words, China’s expansion in mature nodes is not only intensifying competition in global foundry markets—it is also forcing equipment vendors worldwide to choose sides:
Either double down on advanced technology monopolies,
or be drawn into the price pressure and substitution dynamics of the mature-node market.
The Most Dangerous Position Is Being “Stuck in the Middle”
If we had to summarize Nikon’s strategic dilemma today in one sentence, it would be this: it is neither the indispensable solution in the world of advanced nodes, nor the lowest-cost player in the world of mature nodes.
This “stuck in the middle” position is one of the most dangerous places to be in an era defined by geopolitics.
During industry upcycles, middle players can still maintain stability by relying on existing customers, legacy product lines, and service revenues. But once the global supply chain begins to reorganize—when tariffs and export controls rise and customer investments become more concentrated—these middle-position companies are often the first to be revalued by the market.
At that point, capital markets begin asking difficult questions:
What will drive your future growth?
Is your technology roadmap about defending the past or creating a breakthrough?
Could geopolitics sever access to your key customers?
Will your products eventually be replaced by China’s domestic alternatives?
Do your profits come from real technological barriers—or from historical legacy?
Once a company can no longer provide convincing answers to these questions, even if short-term revenue remains stable, valuation and investor confidence tend to collapse first.
Nikon increasingly appears to fit this pattern. While the latest losses were triggered largely by impairment charges related to its 3D printing business from an accounting perspective, what the market is truly worried about is not a single impairment event. The real concern is whether Nikon still has a compelling story for the next decade.
Why Canon Is Actively Promoting Nanoimprint Lithography: Japan Knows It Cannot Rely on Its Old Strongholds Forever
When placing Nikon within the broader context of Japan’s semiconductor equipment industry, Canon’s strategy becomes a revealing contrast.
Canon is attempting to identify a technological pathway distinct from EUV by advancing nanoimprint lithography (NIL) and related manufacturing concepts. In January 2026, Canon announced progress in wafer planarization technology, using an inkjet-based approach to achieve smoother wafer surfaces. Meanwhile, the industry has been closely monitoring Canon’s long-term development and commercialization plans for nanoimprint lithography.
In the short term, these technologies are unlikely to challenge ASML’s dominance in EUV. However, they send a clear signal:
Japanese equipment makers understand that relying solely on traditional DUV tools and defending legacy market positions will become increasingly difficult in the future.
In other words, Canon is searching for “the next narrative.” Nikon, by contrast, currently appears to the market as a company still digesting the aftereffects of the previous technological era.
This does not necessarily mean Canon will succeed. Rather, it highlights an important reality of the semiconductor equipment sector: capital markets do not evaluate companies only on current orders or revenue. What matters just as much is whether the company still holds a credible entry ticket to the next manufacturing paradigm. For equipment suppliers, technology narratives themselves become part of valuation.
Another reason Canon’s nanoimprint strategy is receiving attention is that NIL has potential advantages in several emerging applications beyond traditional CMOS scaling, particularly in silicon photonics and AR/VR optical components.
In silicon photonics, NIL can be used to fabricate high-density photonic structures such as waveguides, diffraction gratings, photonic crystals, and metasurfaces with extremely high pattern fidelity and relatively low cost at scale. Because many photonic devices require large-area periodic structures rather than ultra-fine transistor features, nanoimprint can sometimes offer manufacturing efficiency advantages compared with conventional lithography.
Similarly, in AR/VR optical systems, NIL is attracting interest for the production of diffractive optical elements (DOE), waveguide couplers, and nano-structured optical surfaces used in near-eye displays. These components often rely on nanoscale surface patterns across large substrates—an area where nanoimprint techniques can be particularly effective.
For this reason, NIL is increasingly being discussed not simply as an alternative lithography approach, but as a potential manufacturing platform for emerging photonic and optical devices.
Seen from this perspective, Canon’s push into nanoimprint is less about directly competing with EUV in advanced logic nodes, and more about positioning itself for new device architectures and optical technologies that could define future semiconductor-adjacent markets.
From Taiwan’s Perspective, This Is Not Just a Japanese Corporate Story—It Signals a Shift in the Center of the Supply Chain
From Taiwan’s vantage point, the most important takeaway from Nikon’s situation is not that a Japanese company’s profitability has deteriorated. Rather, it reveals a broader trend: global semiconductor competition is evolving from a single race for advanced nodes into a multi-layered contest across technologies, regions, and political systems.
Taiwan still occupies the core position in advanced manufacturing. In particular, TSMC’s leadership in 2nm, advanced packaging, CoWoS, and SoIC remains extremely difficult to challenge in the near term. However, if this dominance leads observers to overlook structural shifts in mature-node manufacturing and foundational chips, it creates a significant blind spot.
Over the next decade, the global semiconductor industry may increasingly resemble three parallel worlds:
The first world revolves around high technology and high capital intensity—centered on companies such as TSMC, ASML, and NVIDIA, along with advanced packaging and AI-driven infrastructure.
The second world is a scale-driven ecosystem centered on China’s mature-node manufacturing, domestic substitution strategies, state-backed subsidies, and the mass production of foundational chips.
The third world consists of companies that historically built their position through technological accumulation but are gradually being marginalized in the new order—suppliers caught between the two systems.
Nikon’s current crisis is a representative example of this third world.
For Taiwan, the real strategic concern is not only whether China can eventually produce more advanced chips. The more immediate question is whether China will first establish a sufficiently deep industrial base in mature nodes, thereby influencing global consumer electronics brands, automotive supply chains, industrial control systems, and the procurement structures of countless component markets.
Once mature-node manufacturing is structurally reshaped by China, the ripple effects will extend across the entire semiconductor ecosystem—equipment, materials, components, and packaging and testing supply chains will all be reconfigured.
This means that if Taiwan focuses only on the glory of advanced nodes while neglecting the pressures in mature-node markets, the pricing power of foundational chips, and the increasing nationalization of semiconductor equipment supply chains, it risks underestimating future challenges.
SemiVision Perspective: The Future Will Not Belong to the Most Advanced Alone—But to the Most Complete
Many people ask whether the future of semiconductors will be determined simply by 2nm, A14, EUV, or High-NA lithography.
The answer is: those technologies matter—but they are not the whole story.
A more complete answer is that the future leadership of the semiconductor industry will belong to those countries or corporate ecosystems capable of simultaneously controlling advanced nodes, mature-node capacity, equipment supply chains, materials, advanced packaging, geopolitical alliances, and the ability to allocate production capacity strategically.
ASML represents the monopoly over critical advanced manufacturing tools.
TSMC represents manufacturing execution and yield leadership at the most advanced nodes.
China is rapidly strengthening its position in mature-node scale and localized industrial ecosystems.
Nikon’s setback serves as a reminder to the entire industry: if you cannot find your position on this new map, even the most illustrious legacy can quickly be discounted.
From this perspective, Nikon’s ¥85 billion net loss is not merely a corporate financial issue. It symbolizes a shift in the coordinates of the global semiconductor supply chain. It demonstrates that the semiconductor industry is no longer defined by a single technological race, but rather by a long-term contest shaped simultaneously by technology, policy, capital, and geopolitics.
Conclusion: Nikon Is Not the End—It Is a Warning
Nikon’s difficulties do not necessarily mean it has lost all relevance. There will likely continue to be opportunities in mature-node manufacturing, specialty applications, advanced packaging, display technologies, and other precision equipment markets.
The real question is not whether Nikon can survive.
The real question is whether it can redefine its role within the new global semiconductor order.
That is the question truly worth asking in 2026.
Because the next phase of semiconductor competition will not simply be about who owns the most advanced machines. It will be about who can maintain technological relevance, strategic customer relationships, and irreplaceable capabilities in a world where supply chains are increasingly divided by geopolitics.
Nikon’s massive loss serves as a reminder to the entire industry:
The most dangerous position is not being behind.
The most dangerous position is having once led—but no longer knowing where you stand.
Reference information:
Nikon is developing a new lithography system in collaboration with partners, designed to be compatible with the immersion ArF (ArFi) lithography ecosystem dominated by ASML. The company aims to launch this product in fiscal year 2028 (April 2027 to March 2028).
In the immersion ArF lithography segment, ASML currently holds over 90% market share, largely due to its mature TWINSCAN dual-stage technology. Nikon, the only other significant player in this space, is aiming to increase its share to a level closer to what it has achieved in the dry ArF market.
Nikon believes that as DRAM and logic semiconductors continue to evolve toward 3D architectures, demand for immersion ArF lithography will increase. To capture more ArFi orders from ASML, Nikon plans to ensure that its next-generation immersion ArF systems are compatible with ASML’s ecosystem, making it easier for customers originally planning to use ASML equipment to transition to Nikon’s platform.
In addition, Nikon stated that its new immersion ArF lithography system will feature a new lens design and stage architecture, with advantages such as a more compact footprint and easier maintenance. Development of the subsequent generation is expected to begin after 2030.