China’s leading semiconductor equipment maker, Shanghai Microelectronics (SMEE 上海微电子) was added to the U.S. “Unverified List” on February 7, as one of the 33 Chinese companies. It caused wide attention in the semiconductor industry and observers point to intensifying technology conflict between the two countries.

An article by Chinese tech media Elecfan said, “The U.S government’s latest move indicates that it has shifted its target to Chinese semiconductor equipment makers, making it more difficult for China.”

The U.S. Commerce Department’s move could restrict SMEE’s imports of U.S. technology and products, according to a South China Morning Post report.

SMEE is perhaps China’s best current hope of producing machines that can manufacture advanced chips. “This move’s impact is not as significant as being added to the Entity List, it could prove costly for a company like SMEE, which is pushing hard to catch up in a strategic technology area, “ said the article.

Lucy Chen, vice president of Taiwan-based Isaiah Research, said “If China wants to reach a certain level of self-reliance in the semiconductor industry … Chinese tool vendors need to work on the lithography tools for foundries and the technology needs to be good enough to compete with ASML, Canon, and Nikon.”

She added it was too early to say what the impact on SMEE’s production would be as a result of being added to the US watch list.

At the same time, the Dutch lithography machine leader ASML is continuing its legal charges against the Beijing-based Chinese semiconductor manufacturing equipment and management company DJEL (东方晶源) on infringement of its commercial secrets, Bloomberg reported on February 9.  ASML said it has reported the case to the related Chinese government departments and may resort to legal actions as well.

Despite the increasingly more daunting challenges, there is a Chinese domestic lithography machine-making industry chain running. “They would not stop trying,” said an industry insider.