China's leading chip producer is running trials on the country's first domestically produced advanced chipmaking equipment in an effort to challenge western rivals in producing artificial intelligence processors.

Semiconductor Manufacturing International Corporation (SMIC) is testing a deep-ultraviolet (DUV) lithography machine made by Yuliangsheng, a Shanghai-based start-up, said two people with knowledge of the development.

The ability to produce advanced DUV machines would represent a big victory in China's ability to overcome US controls on chip export, reduce reliance on western technology and increase the production capacity of advanced AI processors.

Lin Qingyuan, semiconductor analyst at Bernstein, said: "If successful, it would represent an important step for Chinese companies, which could build on this breakthrough for more advanced machinery."

To date, SMIC and Chinese chipmakers have relied on devices built by ASML, the dominant Dutch maker of advanced lithographic equipment, but access to new machines has been limited by US export controls over recent years. Chinese chip equipment maker Shanghai Micro Electronics Equipment makes less-advanced DUV machines.

China also continues to lack access to the best available chipmaking tools -- extreme ultraviolet photolithography machines (EUV) used to make the most cutting-edge chips for companies such as Nvidia. ASML is banned from selling EUV equipment to China.

China's DUV effort has challenges to overcome. While the majority of its components in Yuliangsheng's machine are made domestically, some parts are sourced from abroad, said those with knowledge of the effort. But they added the company is making efforts to make all parts in the country soon.

While early results from the SMIC trial are promising, it remains unclear if and when the machine can be used for mass chip production, one of the people said.

It typically takes at least a year for new DUV tools to be adjusted many times in order to reach the stability and yields -- the percentage of functional chips made on its manufacturing line -- that make them viable for use in production.

The machines being tested use so-called immersion technology, similar to that employed by ASML, said people with knowledge of the effort.

Chinese chipmakers rely on ASML's DUV machines, most of them bought before the US-led export controls or second hand from other countries, to produce the country's most advanced processors such as Huawei's Ascend series.

SMIC is testing a 28 nanometre (nm) Chinese-made DUV lithography machine and then utilising so-called "multi-patterning techniques" to produce 7nm chips, said two people with knowledge of the development. In industry parlance, "nanometres" refer to each new generation of chip, rather than a semiconductor's physical dimensions.

Machines such as the ones SMIC is trialling could also be pushed to produce 5nm processors at a lower yield, but not any more advanced products.

By contrast, Taiwan Semiconductor Manufacturing Corporation (TSMC) will start mass-producing cutting-edge 2nm chips using ASML's latest EUV equipment later this year.

EUV remains the more challenging bottleneck to overcome in order to produce the chips that can take on market leader Nvidia.

Shenzhen-based SiCarrier, listed as Yuliangsheng's shareholder on company registry, is among companies dedicating resources to making EUV machines, but these efforts remains in the early stages, according to the people.

SiCarrier, founded in 2021, unveiled a large fleet of advanced chip manufacturing equipment to challenge companies such as Tokyo Electron and Applied Materials, at the Shanghai Semicon Conference in March. Its equipment lines are named after China's biggest mountains such as Wuyi and Emei.

The EUV project has an internal code name of "Mount Everest", people with knowledge of their efforts said.

Chinese chipmakers, led by SMIC, are seeking to triple their output in 2026, the FT reported last month. Most of this capacity increase will still use earlier stocked up DUV machines from ASML, while the domestic tools are being tested to start mass production as early as 2027, the people said.

"It is one thing to have a prototype of a lithography machine, it is another thing to put it into volume production and make it compete with ASML.," said Bernstein's Lin. "This could take another few years."

SMIC and SiCarrier did not respond to requests for comment.

China trials its first advanced tools for AI chipmaking