Photolithography giant, suddenly "collapses"

Why Did Nikon Miss Key Opportunities in Technological Transformation?

Recently, Japanese optical giant Nikon issued its most severe profit warning in history—expecting a massive loss of 85 billion yen in the fiscal year 2025, marking the worst record for the company since its founding in 1917.

Its core lithography business has encountered a complete collapse, putting the once-dominant lithography leader in an unprecedented survival crisis.

Reports indicate that in the past six months, Nikon shipped only 9 lithography machines, all of which were older models with lower technology content, showing a significant lag in technological generations.

This means that this company, which once closely partnered with Intel and AMD and set industry standards, has completely lost its competitiveness in advanced processes. Nikon not only failed to capitalize on the surge in AI computing power, but also fell into an unprecedented financial quagmire due to a sharp decline in orders and inventory backlog.

In stark contrast, Dutch ASML sold 327 units in 2025, with 48 units of high-end EUV lithography machines alone, occupying an absolute dominant position in the global high-end market.

A Turning Point in an Era

Once known as one of the “three giants of lithography machines” alongside ASML and Canon, Nikon held about 40% of the global lithography machine market in 2001, with nearly one in every two lithography machines in the world produced by Nikon. This company, once sought after by chip giants, has seen its market share plummet to single digits, with its competitive edge nearly diminished.

From peak to trough, Nikon’s fall did not happen overnight. Its fate reflects the dramatic changes in the global lithography machine market over the past thirty years and poses a harsh question to the industry: When the industry leader has a clear lead, how should the former champion position itself? When the technical route is locked down by competitors, do latecomers still have a chance to turn the tide?

The Path of Nikon’s Downfall

The “Golden Age” of Nikon Lithography Machines

To understand Nikon’s decline, one must first return to its glorious days.

Nikon’s lithography machine business began in the 1970s, leveraging its core technological advantages in camera lenses to quickly enter the semiconductor lithography equipment market.

At that time, the global semiconductor industry was in the early stages of rapid rise, transitioning chip processes from micron to nanometer levels, with lithography equipment becoming the focal point for major companies.

With precise market judgment and leading optical technology, Nikon quickly established a foothold in the lithography machine market and experienced explosive growth in the 1980s.

At that time, Nikon’s 193nm wavelength dry lithography machine became the preferred equipment for global chip manufacturers due to its ultra-high resolution and stability, dominating the market for the 193nm dry lithography era.

According to industry data, in the mid-1990s, Nikon’s global market share for lithography machines exceeded 50%, competing neck-and-neck with Canon, with both companies accounting for over 90% of the global lithography machine market, forming a monopoly of the “Japanese dual champions.”

During this period, Nikon’s core competitive advantage was its deep partnerships with top global chip companies.

At that time, American chip giants like Intel and AMD were fully pushing for CPU process upgrades, and Nikon’s lithography machines, with their stable performance and leading technology, became core suppliers for these companies. The lithography equipment customized for Intel perfectly matched its CPU production needs, helping Intel gain an advantage in its competition with AMD.

It is reported that major chip companies, from Intel and AMD to IBM and Texas Instruments, went so far as to establish liaison teams stationed at Nikon’s Silicon Valley branch just to secure priority supply rights for a Nikon lithography machine. There were even rumors that some semiconductor executives personally visited Nikon’s factory to wait, prepaying in full just to secure a debugging slot. This deep binding also provided Nikon with stable orders and substantial profits, further solidifying its industry position.

In addition to binding with American giants, Nikon also had a strong customer base in Japan. Companies like Sony, Toshiba, and Hitachi were all core clients of Nikon, and this “local synergy” advantage allowed Nikon to gain an upper hand in the global market.

At its peak, Nikon’s lithography machines were not only the benchmark for technology but also the standard-setters for the industry, with their lithography technology specifications adopted by most global chip manufacturers.

Under Nikon’s iron grip, American lithography machine pioneer GCA was forced to declare bankruptcy; at that time, ASML was merely a struggling small manufacturer in the European market with a market share of less than 10%, hardly comparable to Nikon.

During this period, Nikon was truly in its prime, with a level of glory that even surpassed today’s ASML.

The lithography business became the core profit pillar of the group, driving the development of other businesses like cameras and telescopes. Nikon was once regarded as a pride of Japanese manufacturing and a model for a technology-driven nation.

No one could have imagined that such a king standing at the top of the industry would fall into such a difficult situation just two or three decades later.

Three Major Mistakes, Gradually Missing the Trend of the Era

The turning point occurred in 2002.

That year, Lin Benjian, then a senior director at TSMC, knocked on Nikon’s door. Addressing the bottlenecks faced by the 193nm dry lithography machine and the slow progress in developing the next-generation 157nm light source, Lin proposed a revolutionary idea: injecting a layer of water between the lens and the wafer. By utilizing the refractive index of water, the effective wavelength of the 193nm light source could be shortened to 134nm, thereby bypassing many challenges of the 157nm route.

This is the immersion lithography technology route that later changed the history of semiconductors.

What should have been a cheaper and more effective shortcut was met with opposition from nearly all of Nikon’s executives. From the chairman to the technical leader, not a single person had the patience to listen to Lin’s explanation. Nikon’s representatives questioned on the spot: “If water contaminates the lens, can TSMC afford the costs? If bubbles cause batch rejection, who will take responsibility?”

The deeper reason lay in path dependence. At that time, Nikon had already invested over hundreds of millions of dollars in the 157nm dry lithography machine. Switching to the immersion route would render all previous investments worthless.

According to reports from Huashang Taolue: Nikon not only rejected Lin Benjian but even tried to use its industry prestige to suppress this idea. Lin later recalled that Nikon’s senior management had called TSMC’s R&D vice president Jiang Shangyi, saying, “Please keep your Lin Benjian in check and do not let him promote this disruptive idea that will distract everyone and waste resources.”

After encountering setbacks at Nikon, Lin flew to the Netherlands.

At that time, ASML was still struggling for survival and desperately needed a breakthrough opportunity. ASML’s technical soul, Martin van den Brink, went against the tide, betting all of ASML’s resources on this crazy idea.

In 2004, ASML, in cooperation with TSMC, launched the world’s first immersion lithography machine, ArFi, which swept the global market with higher precision and lower costs.

By 2007, ASML’s market share exceeded 60%, forming a crushing trend for the first time; after 2010, ASML’s market share surpassed 70%, completely widening the gap with Nikon and Canon.

Nikon’s once-proud top lenses lost their luster in the face of the new technological route. Nikon and Canon were forced to abandon the 157nm route and follow immersion technology, but it was already too late. In the immersion ArF lithography field, ASML firmly held over 90% of the market share with its mature TWINSCAN dual-stage technology.

This was a textbook-level technological misjudgment. Nikon did not lack technical capability, but was constrained by its own successful experience and had a natural resistance to new technologies outside its system.

However, the failure in immersion was just the beginning; Nikon’s real “Waterloo” was yet to come.

Facing the disastrous defeat of immersion lithography machines, Nikon pinned its hopes on the next-generation technology: EUV (extreme ultraviolet lithography). This technology, with a shorter wavelength (13.5nm) capable of etching smaller circuits on chips, was seen as the key battle for its return to glory.

At that time, Nikon’s lithography technology head, Masaru Takeda, set ambitious goals: fully self-developed and entirely produced in Japan. He attempted to replicate the era of precision manufacturing that conquered the world within a closed wall.

Meanwhile, the Japanese government, having lost its status as a chip powerhouse, also fully supported this as a battle for national fortune. Led by the Ministry of Economy, Trade and Industry, Japan constructed a massive “industry-government-academia” alliance, investing hundreds of billions of yen, uniting Nikon, Canon, Tokyo Electron, Shin-Etsu Chemical, and other industry chain enterprises to tackle challenges together.

This was a typical Japanese-style charge: concentrated resources, single objective.

But by this time, the world had changed.

In 2012, while Nikon was fully committed to the EUV project, ASML received its first large-scale strategic investments from Intel, Samsung, and TSMC. The three major clients jointly funded ASML to accelerate EUV development and established their own EUV alliance. This alliance not only bound the world’s top chip manufacturers but also gathered the strongest industry chain companies like Germany’s Zeiss (lenses) and America’s Cymer (light sources).

This “vertical cooperation” model enabled ASML to concentrate resources on system integration and core technological breakthroughs, rather than being spread too thin.

This was also one of the deeper reasons for Nikon’s failure.

For a long time, Japanese companies have believed in a fully self-researched production model, choosing to highly self-develop core components (lenses, light sources, precision machinery). This “vertical integration” could ensure extreme quality in an era of slow technological iteration, but when the “pinnacle of human industry” arrives—where EUV requires global high-level collaboration, with research and development costs soaring into the tens of billions of dollars and involving hundreds of thousands of components—Nikon found that it could no longer afford this entry ticket. Meanwhile, ASML’s choice of “benefit bundling and risk sharing” led it down a completely different path.

Even more critically, the United States, which had previously suffered significant losses from Japanese chips, excluded Japanese manufacturers like Nikon and Canon from the EUV technology alliance on grounds of national security, cutting off their access to America’s top technologies.

At this point, Nikon’s “fully self-developed” approach became “reinventing the wheel.”

By 2018, Nikon’s estimated investment in the EUV project exceeded 100 billion yen, making it the largest single technical bet in the company’s history. However, this investment yielded only a non-commercializable prototype. While ASML’s EUV lithography machines had already been iterated rapidly on TSMC’s production line, Nikon’s prototype remained gathering dust in the lab.

When TSMC announced mass production of its 7nm process in 2018, ASML monopolized 90% of the global high-end lithography machine orders with EUV technology, establishing an irreplaceable technological hegemony.

Ultimately, Nikon was forced to announce the termination of its EUV lithography machine’s commercialization development.

In addition to the series of misjudgments in the technology route, Nikon also made fatal errors in its market strategy. It over-reliantly bet on the single giant Intel. In 2024, due to massive losses, Intel significantly reduced its capital expenditures, directly leading to a sharp drop in Nikon’s orders. Meanwhile, Nikon failed to timely expand its client base to core chip manufacturers like TSMC and Samsung, leaving a gap in orders that could not be filled.

The external policy environment further exacerbated the situation. Over the past five years, China had been Nikon’s biggest “lifeline.” With the expansion of mainland wafer fabs, the sales share of Nikon’s precision equipment to China once exceeded 40%.

However, when the U.S. implemented export controls on semiconductor equipment to China, Nikon chose to closely follow the U.S. footsteps, abandoning cooperation opportunities, leading to delays in equipment delivery, soaring costs, and prompting Chinese customers to turn to domestic alternatives, further squeezing its survival space. Nikkei Asia pointed out that China has become the third country in the world with complete lithography machine manufacturing capabilities, and Nikon missed the opportunity to share the pie with its expensive old models.

In September 2025, Nikon closed its Yokohama factory, which had been in operation for 58 years, marking a further contraction of its lithography machine business. Meanwhile, 70-year-old Masaru Takeda is about to step down. From the technical leader to the pinnacle of power, this Nikon veteran once tried to regain former glory by his own efforts, but ultimately fell short.

ASML: From “Defensive” to “Offensive”

As Nikon gradually approached collapse, ASML transformed from an industry follower to the absolute leader in the global lithography machine market.

In the high-end lithography machine sector, ASML’s monopoly position is unmatched. Especially in the EUV lithography market, ASML stands alone, controlling the “throat” of advanced chip manufacturing at 7nm and below, with TSMC, Samsung, and Intel all relying on ASML’s EUV lithography machines.

Statistics show that ASML holds 100% of the EUV lithography machine market and over 90% of the high-end DUV lithography machine market, creating robust technological barriers and market moats. This forms the basis of its “cash cow” and monopoly.

But ASML did not stop there.

As Moore’s Law approaches physical limits, the costs of purely relying on transistor miniaturization to improve chip performance are becoming increasingly high and difficult. The industry is looking toward another direction: advanced packaging.

As chip processes continue to approach physical limits, advanced packaging technology has become an important path to enhance chip performance. This is precisely the core technology relied upon by Nvidia’s H100/B200 and other AI chips, highlighting the importance of packaging technologies like TSMC’s CoWoS and InFO.

ASML keenly realized: merely controlling “front-end manufacturing” may no longer be sufficient to dominate the future. If it could gain an advantage in advanced packaging equipment, it could extend from “front-end manufacturing” to “back-end packaging,” gaining control over the entire chip manufacturing process and further expanding its market share, solidifying its industry hegemony.

Thus, ASML shifted to “offensive,” beginning to layout and explore the advanced packaging equipment sector.

It can be said that while competitors are still in the quagmire, the winners have already started redefining the new battlefield.

In October 2025, ASML took a substantial step by launching its first advanced packaging lithography machine, TWINSCAN XT:260, officially entering the advanced packaging market.

This equipment uses a 365nm i-line light source to achieve 400nm resolution patterning, mainly applied in critical processes like RDL and TSV. Its overlay accuracy reaches ±1.2nm, a 52% improvement over the previous generation, with a production efficiency of 270 wafers per hour, four times that of the previous generation.

The launch of TWINSCAN XT:260 marks ASML’s official entry into the advanced packaging equipment market, leveraging the technological advantages and brand influence accumulated in the lithography equipment field, quickly gaining market recognition. According to industry sources, core clients such as TSMC and Samsung have already placed orders for ASML’s advanced packaging lithography machines for the development and mass production of their Chiplet technologies.

But this may just be the beginning.

Recently, industry insiders revealed that ASML has begun developing hybrid bonding equipment and is collaborating with partners such as Prodrive, which supplies magnetic levitation systems for EUV lithography machines, and VDL-ETG to advance the initiative. Hybrid bonding is the core technology for the next generation of 3D integration, enabling direct bonding of copper to copper, eliminating bumps and significantly improving connection density.

It is evident that ASML is attempting to replicate the technological barriers of lithography machines—precision alignment and high-precision motion control—onto back-end equipment, seizing the cake originally belonging to equipment manufacturers like Besi and Applied Materials.

ASML’s Chief Technology Officer Marco Pieters previously stated that the company will continue to evaluate the long-term development trends of the semiconductor industry, focusing on the development of equipment bases required for packaging and bonding, preparing for related business layouts.

ASML’s move sends a clear signal: the war between equipment giants has evolved from a single process to a chain competition across the entire chip manufacturing process. Whomever can provide a system-level solution from front-end to back-end will gain greater influence in the next round of industry reshuffling.

Canon:

Finding “Singularity” in the Gaps

In the landscape of Nikon’s collapse and ASML’s dominance, Canon chose a third path.

As one of the three giants, Canon also missed the EUV era. However, unlike Nikon, which clashed head-on in the high-end market, Canon was well aware that it could not catch up with ASML in the wavelength race, and pragmatically shifted focus to differentiate survival.

On one hand, Canon delves deeply into the mature process lithography machine market. Relying on its accumulation in the optical field, Canon offers cost-effective products, firmly maintaining its position in the i-line, KrF, and other mature process markets, which grants it high loyalty among second- and third-tier wafer fabs. Although its technology level is lower than that of ASML’s EUV and ArFi machines, Canon thrives in niche markets in power devices, sensors, displays, and advanced packaging.

On the other hand, Canon is exploring a new frontier: nanoimprinting (NIL).

This technology operates on principles completely different from optical lithography; NIL does not use complex optical systems to project patterns onto wafers but directly stamps templates with circuit patterns onto the wafer’s photoresist, then cures it using ultraviolet light.

In theory, the advantages of nanoimprinting are significant: its resolution can rival or even surpass that of EUV, its costs are only one-tenth of EUV systems, and the single wafer processing cost is about one-fourth that of EUV; energy consumption is reduced by over 90%—EUV machines can reach up to 1 megawatt, while NIL only requires about 100 kilowatts.

In 2014, Canon acquired the nanoimprinting company Molecular Imprints Inc. and launched its own technology brand, J-FIL. In October 2023, Canon officially launched the FPA-1200NZ2C nanoimprinting lithography system, claiming it can be used to produce 5nm chips and may even reach down to 2nm in the future. SK Hynix has already introduced nanoimprinting equipment from Canon for mass production of 3D NAND flash memory.

This is a complete bypass of the EUV system; if nanoimprinting can achieve large-scale production in the storage chip field, which has a higher tolerance for defect rates, Canon may directly rewrite the rules of the game.

However, the commercial path for nanoimprinting is still fraught with thorns, with template lifespan and defect control being the two core challenges that this technology faces.

Due to direct contact with the wafer, the nanostructures on the template are extremely fragile. Current mass production tests show that the template lifespan can only support imprinting about 50 wafers, far short of the 100,000 wafers lifespan of optical masks. Canon claims that new designs can extend this tenfold, but industry testing remains unsatisfactory.

Even more critical is the defect replication issue: any tiny defect on the template will be replicated onto all wafers, causing severe repeated defects. Detecting defects on the template requires equipment capacity equivalent to a whole year’s supply of global mask inspection equipment, making economic viability clearly unfeasible.

Moreover, NIL’s overlay accuracy and productivity still lag behind ASML’s EUV systems. Due to Canon’s use of a single wafer stage architecture, it cannot perform measurement and imprinting simultaneously, with maximum productivity only about 25 wafers per hour.

As the industry describes it: “NIL is like a perfectly designed precision clock, outperforming competitors in performance and cost, but the key gears are made of glass—seemingly perfect, yet unable to withstand actual operation.”

Canon is clearly aware of this and continues to invest in research and development.

In January 2026, Canon announced the world’s first development and practical application of a groundbreaking wafer flattening technology called IAP (Inkjet Adaptive Planarization), using the accumulation of nanoimprinting technology to control the topography of 300mm wafer surfaces within 5nm, with plans for commercialization in 2027. This can be seen as a derived application of nanoimprinting technology, circumventing core challenges and seeking breakthroughs in niche areas.

Canon’s path offers the industry a revelation: When mainstream technological routes are monopolized by giants, latecomers do not necessarily have to confront them head-on. Finding technological singularities in the gaps and building differentiated competitive advantages around long-tail customers can also secure survival space.

Review and Insights: The Rules of the Lithography Machine Battlefield Have Changed

Reviewing the development paths of the three giants in global lithography machines, it is not difficult to find that today’s lithography machine market has formed a pattern of “ASML’s reign, Canon’s watchfulness, and Nikon’s lagging.”

The rise and fall of these three companies reflect profound changes in the global lithography machine industry, releasing many thought-provoking signals and providing valuable insights for other companies in the industry.

The Battle of Corporate Genes

The dilemmas faced by Nikon and Canon largely reflect the common issues of Japanese manufacturing in the face of disruptive technological changes—path dependence and perfectionism.

Japanese companies often pursue extreme perfection in technology research and development; once they invest resources in developing a specific technology route, it becomes difficult to easily abandon it. This “path dependence” makes it hard for them to quickly adjust their strategies when facing new technological waves, ultimately missing out on opportunities.

Especially in the face of disruptive technologies, past successful experiences often become the biggest burden.

Nikon’s hesitation before immersion technology was essentially a confidence in its own “vertical integration” model—self-developing all core components to ensure absolute quality. However, as the complexity of lithography machines increased exponentially, this closed system became an obstacle to innovation. No single company can master all cutting-edge technologies alone.

ASML’s success, on the other hand, benefits from its openness and collaboration.

ASML keenly captured the trend of technological change, quickly adjusted its technical routes, and engaged in deep cooperation with top global suppliers, constructing a vast industrial ecosystem. This open collaborative model allowed ASML to focus its energies on core technology integration and optimization while leveraging global resources to rapidly enhance product performance, reduce research and development costs, and ultimately achieve industry monopoly. This ecosystem advantage built on open collaboration is perhaps harder to replicate than going it alone.

Behind this is a difference in corporate genes. The “vertical integration” gene of Japanese companies emphasizes self-sufficiency and meticulousness, which can be advantageous in a relatively stable technological era; however, in today’s rapidly evolving technology landscape with increasing complexity, this gene has become an obstacle to innovation. ASML’s open collaboration gene emphasizes resource integration and flexibility, aligning better with the developmental trends of the industry in the new era.

In addition, ASML’s success is also attributed to its gene of continuous innovation. After dominating the high-end lithography machine market, ASML did not rest on its laurels; instead, it keenly captured the opportunities in advanced packaging technology, accelerating cross-industry layout, transforming from a single lithography equipment supplier to a full-process semiconductor equipment supplier, continuously broadening its moat.

However, Canon, after missing opportunities, has shown greater strategic flexibility compared to Nikon. It did not cling to traditional lithography technology but focused on differentiated choices, exploring new paths, and developing long-tail customers, thus gaining its survival space in the gaps. This wisdom of “knowing when to advance and when to retreat” is worth learning from for other non-leading manufacturers.

Elevating Competitive Dimensions: From “Single Machine” to “Ecosystem”

The war of lithography machines may have temporarily ended, but the battle for semiconductor equipment has just begun.

ASML’s expansion into advanced packaging marks an upgrade in the competitive dimensions among equipment giants. As the outcomes in the lithography machine market have been determined, ASML begins to leverage its technological barriers in precision alignment and high-precision motion control to extend into back-end equipment, aiming to build a full-process solution from “front-end manufacturing” to “back-end packaging.”

According to Yole Group predictions, the global advanced packaging market size is expected to grow from $38-46 billion in 2024 to $79-80 billion by 2030, with a compound annual growth rate of 9.4%-9.5%.

This incremental market will become a new battlefield for equipment giants.

This also means that in the future semiconductor equipment market, competition will no longer be about single-point breakthroughs but will revolve around system-level technological integration capabilities, transitioning from single links to full-process layouts. Whomever can provide more complete solutions that help customers reduce system complexity and shorten time-to-market will gain the upper hand in the next round of competition.

Additionally, it is worth noting that geopolitical factors will profoundly influence the future landscape of the semiconductor equipment market. In recent years, the geopolitical games surrounding the global semiconductor industry have intensified, with export controls and technological blockades not only affecting the development of companies but also changing the industry’s supply chain structure. In the future, companies must fully consider geopolitical factors when formulating strategies, building diversified supply chains to mitigate operational risks.

In Conclusion

Nikon’s downfall serves as a warning bell, reminding all technology companies: in this harsh industry driven by both capital and technology, there are no eternal kings, only adaptors of the times.

Nikon does not lack technology, nor does it lack capital. It lost due to misjudgments about new trends, the inertia of a closed system, and the slow adjustment of its customer structure. When the technology route shifts, past assets can quickly become liabilities.

ASML’s success today stems from its bold embrace of immersion technology twenty years ago and its strategic vision of building a global open ecosystem. However, history has proven that hegemony is often the prelude to decline. As ASML expands from a lithography machine leader to a “full-industry chain integrator,” it also faces new risks: further increases in technological complexity, uncertainties in geopolitics, and the threats of potentially disruptive technologies.

According to the China Commercial Industry Research Institute, the global lithography machine market size is expected to reach $39.2 billion by 2026. In this massive and rapidly expanding field, the rules of the game have been rewritten, and shifts in technological paradigms, innovations in business models, and the dynamics of ecosystems may overturn existing patterns at any time.

The only certainty is that competition in the semiconductor industry will never cease. Only those companies that remain open, embrace change, and maintain respect for the transformations of the times will survive the next technological wave.

Nikon’s collapse is an elegy for the old era; while ASML’s expansion and Canon’s exploration are just the prologue to the new battlefield. The story of lithography machines is far from over; it has merely turned to a more complex and brutal chapter.