There were widely circulated rumors two years ago that Huawei was poaching employees from SMEE to build its own litho machine, and SMEE complained and had escalated the issue.
Back then, there were also discussions and rumors about Huawei becoming a IDM and, indeed, that Huawei was trying to build their own fab, albeit of a rather old process node (40nm).
It makes a lot of sense for Huawei to acquire an old fab to practice and learn and build capability, with a goal to become an IDM eventually. But it simply defies logic that Huawei would build its own lithography machine, let alone DUV one. It just doesn't make any business sense.
I still largely remain unconvinced that Huawei would make its own DUV litho machine given the challenges, at least until we get more convincing evidence. But we also can not completely rule out the possibility. This ain't normal time for China's semiconductor industry. We can not approach the challenge strictly from a normal-functioning market perspective, not even from a key state project perspective perhaps. Besides, SMEE is really just an integrator without a particularly strong track records, a role that Huawei can also play, perhaps even better at it. The success of China's DUV/EUV depends much on the subassembly, component suppliers, as well as large state R&D institutions. Finally, SMEE is not the only institution in China that builds lithography machines, CETC, the state-owned defense electronics giant, also does.
