Author: Feng Ning
In the spring of 2026, Elon Musk officially unveiled the TeraFab chip manufacturing master plan. His reasoning is straightforward: SpaceX and Tesla will require at least 1 terawatt of computing power in the future, a scale exceeding the current global chip supply capacity by more than 10 times.
Later that month, he appeared to make an even bigger bet: entering the lithography machine market.
01. TeraFab Sets Its Sights on Lithography Machines
A blogger posted that, judging from the information released by TeraFab, Elon Musk seems to be pursuing the FEL (Free Electron Laser) route to disrupt the monopoly of traditional EUV (Extreme Ultraviolet) Lithography.
Musk himself later posted "FEL FTW" (FEL For The Win) on social media, which was seen by the outside world as indirect confirmation of this speculation. Combined with TeraFab's slender factory design and Musk's statements, the FEL technology route has become the hottest conjecture direction at present. According to previous plans, TeraFab will build an integrated chip manufacturing base, producing both logic chips and memory chips simultaneously, and integrating lithography, packaging, and testing processes all within the same factory.
Coincidentally, in July last year, semiconductor startup xLight announced the completion of an oversubscribed $40 million Series B funding round. This funding will focus on FEL R&D, aiming to break through the physical limits of existing EUV lithography technology and provide critical light source support for the mass production of 2nm and more advanced process node chips. Notably, in March last year, former Intel CEO Pat Gelsinger posted on LinkedIn that he had joined xLight as Executive Chairman.
For a time, the inherent characteristics of FEL technology itself sparked enthusiastic discussions within the industry.
02. FEL: An Alternative Solution for EUV
Throughout the entire AI (Artificial Intelligence) chip supply chain, the Netherlands-based ASML is currently the only company in the world capable of manufacturing EUV equipment, accounting for over 90% of the lithography equipment market share.
The company's EUV lithography machine employs a Laser-Produced Plasma (LPP) EUV light source. Its principle involves using a 30kW carbon dioxide laser to bombard tin metal droplets ejected from a nozzle at a rate of 50,000 drops per second, with two strikes per drop (requiring 100,000 laser pulses per second), vaporizing them into plasma. The 13.5nm wavelength EUV light is obtained through transitions between energy levels of highly charged tin ions.
Although LPP technology has enabled the commercialization of EUV lithography, its inherent physical limitations are being rapidly amplified as process nodes advance.
First is the bottleneck in energy conversion efficiency. There is a keyword in the above explanation: 13.5nm wavelength. This means that compared to the 193nm light source used in current mainstream DUV lithography machines, the EUV light source is only one-fifteenth, enabling the etching of smaller trenches on silicon wafers. Currently, ASML mainly uses carbon dioxide lasers from the US company Cymer to excite tin plasma to generate 13.5nm extreme ultraviolet light. The company's technology drives a laser-to-tin plasma conversion efficiency of 5.5%. Coupled with the carbon dioxide laser's own electro-optical efficiency of about 10% and transmission losses from the collector mirror, the actual EUV light utilization rate from the power grid to the wafer is generally less than 0.5%.
Second is tin debris contamination. During the plasma generation process, high-speed sputtered tin ions and neutral debris continuously deposit on the surface of the extremely expensive multilayer film collector mirror, leading to decreased reflectivity and shortened lifespan.
Third is the power ceiling. Current LPP-EUV light sources have reached a maximum EUV power of about 600W. However, to meet the manufacturing requirements of the 2nm node and below, the required EUV power needs to exceed 1.5 kilowatts. At this stage, 500-600W EUV systems mainly rely on multiple patterning to accumulate photon dose to offset the shortcoming of light source power.
In February this year, ASML announced plans to increase the production efficiency of the next-generation High-NA (High Numerical Aperture) EUV lithography machines by 50% before 2030 by introducing a brand-new light source system with a power of up to 1000 watts. By 2030, the wafer processing capacity of a single EUV machine will increase from 220 wafers per hour to 330 wafers per hour.
Compared to LPP technology, FEL does not rely on plasma conversion. FEL, short for Free Electron Laser, features a complete light source system where an electron gun emits an initial electron beam, which is accelerated to near the speed of light by a linear accelerator (advanced solutions mostly adopt superconducting linear accelerators). The high-density electron beam in a relativistic state enters an undulator composed of a periodic alternating magnetic field. Under the influence of the magnetic field, the electrons oscillate transversely and periodically, generating spontaneous radiation; the radiation light field continuously modulates the electron beam, prompting the electrons to form microbunches with the radiation wavelength as the period. The microbunched electrons generate coherent radiation and form positive feedback, exponentially amplifying the radiation intensity; combined with technical means such as seed injection, the system can ultimately output a stable-wavelength EUV beam.
Therefore, the extreme ultraviolet wavelength generated by FEL is considered a candidate band for next-generation lithography. This band is shorter than the current 13.5nm EUV wavelength and is close to the soft X-ray region. According to public information, xLight's technical goal is to precisely tune within the 2~7nm Blue-X band (also known as the "Beyond EUV" band).
Furthermore, there is no process of tin metal droplet bombardment or plasma sputtering inside the entire optical path, and no metal debris deposition will occur in the vacuum chamber of the optical path. The EUV-FEL light source can also generate high EUV power exceeding 10 kW. It can simultaneously supply over 1000W of EUV power to 10 EUV lithography machines without causing tin contamination on the Mo/Si reflective mirrors.
03. Have the Rules of the Lithography Machine Game Been Rewritten?
Peeling back the shell of the lithography industry, three clear technological trajectories can be seen: the incremental iteration of EUV, the light source innovation for EUV, and non-EUV alternative solutions. The three coexist, but EUV iteration remains the absolute protagonist, while the latter two are more like "alternative moves" in a chess game.
First Camp: ASML's Incremental Iteration Remains the Absolute Protagonist.
ASML still firmly controls the mainstream track. In the first quarter of this year, net sales were 8.8 billion euros, with a net profit of 2.8 billion euros; in the second quarter, total net sales were 9.326 billion euros, with a net profit of 2.918 billion euros. Meanwhile, ASML has also significantly raised its full-year performance guidance for the second time this year, substantially increasing the forecast for full-year sales in 2026 to 43 billion to 45 billion euros.
As the most core lithography equipment manufacturer upstream in wafer manufacturing, ASML's soaring performance reflects the arms race currently unfolding across the entire tech industry. Among them, giants such as Amazon, Google, and Microsoft are pouring hundreds of billions of dollars into the infrastructure sector, igniting massive downstream demand for high-end AI chips. Wafer fabs, including logic and memory, are accelerating capacity expansion, pushing the demand for lithography machines to a fever pitch.
Capacity expansion is equally aggressive. The company plans to increase capacity by 30% in 2027 based on the 2026 capacity plan of about 65 Low-NA (Low Numerical Aperture) EUV machines, and is studying a further 30% capacity increase in 2028. At the same time, it plans to increase capacity by 30% in 2027 based on the 2026 capacity plan of about 130 immersion DUV machines, and is studying another 30% capacity increase in 2028.
High-NA EUV (High Numerical Aperture Extreme Ultraviolet Lithography) is ASML's next-generation "trump card." It adopts a 0.55 numerical aperture optical system, achieving 8nm resolution, supporting 3nm and below process nodes, and providing technical reserves for the 1nm node. This equipment improves circuit etching fineness by 1.7 times through single exposure, increases imaging contrast by 40%, and achieves a transistor density 2.9 times that of the previous generation system, effectively reducing chip power consumption and improving computing speed.
However, since a single High-NA EUV machine costs about $400 million, nearly twice that of traditional EUV lithography machines, and there is extremely high technical difficulty in production line adaptation and integration, the application status of High-NA EUV is not very ideal. Zhang Xiaoqiang, Senior Vice President in charge of Business Development and Global Operations and Deputy Co-COO at TSMC (Taiwan Semiconductor Manufacturing Company), revealed to the media at a press conference before the annual technology forum that the company currently has no plans to deploy ASML's High-NA EUV machines specifically designed for next-generation processors.
Second Camp: Light Source Innovation—Precisely Striking ASML's "Heart".
This is the FEL route chosen by Musk's TeraFab and xLight. Instead of directly challenging ASML's dominance in complete optical machines, it seeks a breakthrough in the light source segment. This means chip manufacturers do not need to replace a large area of existing supporting equipment such as lithography, etching, deposition, and inspection; they only need to replace the light source system to achieve significant capacity and cost improvements. This "plug-and-play" upgrade path is highly attractive to wafer fabs.
xLight claims that the power of its FEL system is more than 4 times that of existing systems. Deploying xLight FEL in existing US wafer fabs can increase production efficiency by 50% and eliminate the need for consumables such as tin or hydrogen; while deploying xLight FEL in newly built wafer fabs can increase production efficiency by 100%. This will enable manufacturers to produce chips with smaller feature sizes and higher efficiency, thereby extending next-generation lithography technology.
If the light source can be independently replaced, ASML's bargaining power will be structurally weakened. However, ASML considered the FEL EUV light source route as early as ten years ago, but ultimately deemed the risk too high and chose the LPP EUV light source. Therefore, whether and when the mass production issues of FEL can be overcome may still require time to explore.
In addition, there are other light source routes. For example, Substrate, a San Francisco startup founded in 2022, has chosen the particle accelerator-based X-ray lithography path. China is also advancing independent EUV light source technology. According to public information, multiple domestic teams are exploring different technological paths, including reverse engineering of existing LPP technology, with the goal of achieving breakthroughs between 2028 and 2030.
Among them, institutions such as Harbin Institute of Technology are attempting to develop a lithography solution based on Laser-Induced Discharge Plasma (LDP). The principle involves evaporating tin between electrodes and then exciting the plasma through high-voltage discharge. The structure is simpler and takes up less space than LPP, but the luminous power density is limited, and whether it can support mass production remains questionable.
Third Camp: Non-Traditional Solutions Completely Bypassing EUV Are Growing in the Shadows.
Nanoimprint Lithography (NIL) is the one with the fastest commercialization progress among them. By directly imprinting patterns through physical templates, NIL does not require complex optical systems and light sources, and its equipment cost and power consumption are far lower than EUV. Japanese manufacturer Canon has promoted the mass production application of NIL in the memory chip field. Although its resolution cannot yet compete with High-NA EUV, NIL has demonstrated cost competitiveness in the memory chip market, which has relatively relaxed requirements for line width.
Electron Beam Lithography (EBL) takes a completely different path. Electron beam lithography is essentially a direct-write technology that uses a focused electron beam to expose a resist point by point, precisely drawing patterns through electromagnetic control. This method does not rely on masks and is highly advantageous in the R&D stage where designs are frequently iterated. It is particularly suitable for scenarios such as quantum devices, new material structures, prototype chips, and mask making.
However, up to now, electron beam lithography has long existed in scientific research and small-scale application fields. The reason is not resolution, but efficiency. Electron beam direct writing belongs to serial exposure; even if single-point accuracy is very high, the overall throughput capacity is still limited, which is unacceptable in wafer-level mass production. But in the R&D stage, this "slow" characteristic instead brings extremely high flexibility. For research teams that need to repeatedly modify layouts, verify physical models, or explore new device structures, saving the mask making process is often more important than improving exposure speed.
Today, EUV is increasingly looking like a veteran who has been running for a long time. The technological bottlenecks are real, but the ecological network ASML has woven around it over the past twenty years is also real. For new players to enter the game, just running fast themselves is not enough—they must also make the entire track change its rules to follow them.
Musk's TeraFab plan is essentially a huge gamble: betting that FEL can move from the laboratory to the wafer fab, betting that "plug-and-play" light source replacement can bypass ASML's patent barriers, and betting that the 1 terawatt computing power demand is sufficient to support a brand-new supply chain.
How the next-generation lithography technology should proceed, the answer may not be too far away. But what is certain is that when Musk typed "FEL FTW" on social media, the lithography machine business was no longer a one-man game for ASML.