What Is China’s Secret ‘Manhattan Project’ And Why It Could Rewrite AI Chip Race With The West

Last Updated:December 18, 2025, 13:36 IST

A secret Chinese programme to achieve chip self-reliance has reached a milestone that the West has tried for years to prevent.

Worker miniatures are placed among the flag of China and printed circuit boards with semiconductor chips, in this illustration picture taken July 5, 2023. (REUTERS)

China’s quest for semiconductor independence has always been ambitious, but until this year, it was widely considered out of reach. The United States and its allies believed they had constructed an impenetrable wall: a system of export controls and chokepoints designed specifically to prevent China from ever mastering the tools needed to manufacture the world’s most advanced chips.

At the centre of that chokepoint is the extreme ultraviolet (EUV) lithography machine, one of the most complex machines ever built, and a technology monopolised by one company: ASML of the Netherlands. In fact, as recently as April, ASML CEO Christophe Fouquet said China would need “many, many years" to develop EUV technology.

However, a report by Reuters has now revealed that inside a high-security Shenzhen compound, Chinese scientists have built a crude but operational prototype of an EUV machine. It fills almost an entire factory floor, was assembled under strict secrecy, and represents the closest China has ever come to breaking the West’s strongest technological blockade. While the machine has not yet produced working chips, it is already generating EUV light, a milestone that experts once said could take China a decade or more to reach.

The discovery has shocked analysts and raised a larger geopolitical question: if China can replicate the very tool that underpins American and allied dominance in AI, defence, and high-end computing, what happens to the existing balance of power?

Before unpacking why this is so significant, it is important to understand why Chinese officials, and even some of the engineers involved, are calling this Beijing’s own “Manhattan Project."

What Was The Original Manhattan Project, And Why Is China’s Effort Compared To It?

The Manhattan Project was the United States’ top-secret wartime programme during the Second World War to build the atomic bomb. It brought together the country’s best scientists under extreme security, combined vast financial and industrial resources, and ultimately produced a weapon that altered global power structures.

The comparison is not casual. According to Reuters, those involved in China’s effort describe it as a nationwide, militarily sensitive, centrally directed programme, involving thousands of engineers across universities, state labs, and companies such as Huawei. The project is part of China’s semiconductor strategy overseen by Ding Xuexiang, a close ally of Chinese President Xi Jinping and head of the Central Science and Technology Commission.

Just like the original Manhattan Project, only a handful of people know the full picture, and many teams are deliberately isolated from one another to preserve secrecy. Recruits reportedly work under aliases, live on-site during the week, and operate inside tightly controlled facilities.

For Beijing, the stakes are framed as equally strategic: control over semiconductor technology means control over the digital foundations of modern warfare, artificial intelligence, quantum computing, and the global economy. It is not simply about tech supremacy; it is about sovereignty.

Why EUV Machines Matter, And Why They Are The West’s Strongest Chokepoint

To understand why this prototype is so consequential, a quick primer is necessary. EUV lithography machines use highly concentrated beams of extreme ultraviolet light to etch nanometre-scale circuits on silicon wafers. These circuits are thousands of times thinner than a human hair and are required to manufacture the most advanced AI and weapons-grade chips.

Until now, only ASML has mastered this technology. Its machines cost roughly $250 million each, weigh around 180 tonnes, and are so complex that even their main supplier network consists of ultra-specialised companies like Germany’s Carl Zeiss AG, which produces the precision mirrors at the heart of the system. These mirrors reflect EUV light with such precision that even microscopic imperfections can ruin an entire chip.

ASML has said it took nearly two decades and billions of euros in R&D before its EUV systems could be commercialised in 2019.

Because of how strategically important these machines are, the US successfully pushed the Netherlands to block any EUV sales to China from 2018 onwards. The control regime later expanded to include older deep ultraviolet (DUV) systems, with the explicit aim of keeping China at least one technological generation behind. No EUV machine has ever been exported to China, ASML told Reuters.

This is why the Shenzhen prototype is a major geopolitical development: it suggests that China may have found a way to bypass the blockade.

How China Built The Prototype: Reverse Engineering, Secret Recruits, And A Nationwide Network

China’s machine is not a polished EUV system. Reuters reports that it is far larger and less refined than ASML’s, and it has yet to produce functional chips. But it is operational, a breakthrough that many analysts believed was nearly impossible without direct access to ASML’s full technology stack.

How did Beijing pull this off? A few central elements stand out:

Recruitment of ex-ASML engineers under strict secrecy: Reuters reports that former ASML engineers, many recently retired and originally from China, were hired with large signing bonuses and instructed to work under false identities inside the Shenzhen facility. Some discovered colleagues they recognised from ASML, but all were required to use aliases at work.

Access to second-hand ASML components: Although EUV systems are restricted, China has been able to legally purchase parts and older ASML machines from secondary markets and auctions. These components helped engineers reverse-engineer key subsystems.

A parallel shadow supply chain: According to Reuters, China also sourced parts from ASML’s suppliers through intermediary companies. Some export-restricted components from Japanese manufacturers Nikon and Canon were integrated into the prototype, highlighting the loopholes in global equipment markets.

State-backed talent and research institutes: The Changchun Institute of Optics, Fine Mechanics and Physics played a pivotal role in integrating EUV light into the optical system, helping the prototype become operational in early 2025. Reuters reports that the institute has been offering “uncapped" salaries and extremely high research grants to PhD specialists.

Huawei’s central coordinating role: Across the supply chain, from design to fabrication to integration, Huawei is deeply embedded. Employees reportedly sleep on-site and operate under strict communication restrictions. Reuters notes that CEO Ren Zhengfei personally briefs senior Chinese leaders on progress.

Put together, these elements mirror the Manhattan Project’s intense secrecy, resource concentration, and strategic national importance.

Why This Is A Huge Power Move

China’s achievement does not mean it has matched ASML or that it can immediately produce cutting-edge chips. But even an operational prototype is enough to trigger long-term strategic consequences:

1. It shortens China’s timeline dramatically: ASML previously suggested that China was “many, many years" away from EUV capabilities. Beijing may be several years closer than expected, with the government aiming for working chips by 2028, though those familiar with the project believe 2030 is more realistic.
2. It weakens the West’s strongest leverage point: Export controls around EUV were considered the most effective tool for constraining China’s rise in AI and advanced weapons. If China eventually produces its own systems, that leverage diminishes.
3. It accelerates the global tech bifurcation: The more China insulates its supply chains, the more the world moves toward two parallel semiconductor ecosystems — one Western, one Chinese.
4. It strengthens China’s long-term defence and AI capabilities: Advanced chips are foundational for autonomous weapons, hyperscale AI models, and military simulation systems. Even incremental progress reduces China’s strategic vulnerability.
5. It signals that talent control is becoming a key battleground: The recruitment of ASML veterans, fake IDs, and isolated teams highlights a growing challenge: the West can restrict machines, but not humans.

How Far Is China From Catching Up?

Despite the excitement within Beijing, the prototype remains far behind ASML’s commercial systems. China still lacks access to the ultra-precise optics that Zeiss produces. Its machine is reportedly crude and many times larger than ASML’s design, reflecting the difficulty of achieving extreme precision.

But even so, the operational light source — the hardest part of EUV engineering — represents a massive leap. As one analyst told Reuters, China does not have to reinvent the entire technology; commercial EUV systems already exist, giving China a roadmap instead of making it start from zero.

The realistic timeline of 2030 for producing chips may still slip. But the psychological effect, that China has moved from “never going to happen" to “it’s only a matter of time", may be the most consequential shift of all.

The Bottom Line

China’s secret EUV prototype does not overturn Western dominance overnight. But it marks the first time Beijing has cracked open the West’s most protected technological fortress.

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