Nikon, once a dominant force in the semiconductor lithography market, is mounting a comeback with a weapon it believes can crack ASML’s near-total grip on advanced chipmaking tools: price. The Japanese optical giant’s newly appointed president, Yasuhiro Omura, has explicitly stated that the company plans to win back customers by offering ArF immersion lithography systems at lower prices than its Dutch rival. “We make many of the components ourselves,” Omura told the Nikkei business daily, “which gives us a cost advantage in competition.” For a company that helped define the industry’s technological trajectory before being eclipsed by ASML’s rise, the declaration carries the weight of a technical veteran who knows exactly where the battle lines are drawn.
The strategy represents more than a price war. It signals Nikon’s intent to reclaim relevance in a market where it has been reduced to a marginal player while ASML has consolidated its monopoly, particularly in extreme ultraviolet (EUV) lithography. But Nikon’s ambitions are narrower and more pragmatic: rather than challenging ASML across the entire lithography spectrum, the company is targeting the one segment where it can still compete — and where customers are increasingly desperate for an alternative.
How deep is Nikon’s current crisis, and what led to its 86 billion yen loss?
To understand why Nikon is now staking its future on a price-driven strategy, one must first grasp the severity of its present situation. For the fiscal year ending March 2026, Nikon posted a staggering 86 billion yen final deficit — the worst in the company’s history. The primary culprit was a 90.6 billion yen impairment loss tied to SLM Solutions, the German metal 3D-printing specialist Nikon acquired in 2023. But the red ink runs deeper than a single bad acquisition.
The core semiconductor lithography business, the very engine that once made Nikon an industry titan, has been sputtering. In the fiscal year ending March 2025, Nikon shipped 11 ArF immersion tools. But in the first three quarters of fiscal 2025 — the period covering April through December 2024 — that number fell to zero. Literally zero shipments of the very machines Omura now plans to sell at a discount. When Omura took the helm in April, he described the company’s condition as “very severe” and immediately identified semiconductor lithography as the top investment priority.
Why does ASML dominate the lithography market so completely?
The market reality Nikon faces is brutal. ASML holds an estimated 80 percent share of the overall lithography equipment market and commands more than 90 percent of the ArF immersion segment. In EUV lithography — the technology required for the most advanced chip nodes — ASML enjoys a 100 percent monopoly. In 2025, ASML shipped 48 EUV tools and 131 ArF immersion DUV systems, generating revenue of 32.7 billion euros (approximately 6 trillion yen). Its order backlog stood at 38.8 billion euros (roughly 7.2 trillion yen). These are numbers in a completely different league from Nikon’s struggling lithography operations, which generated 677.1 billion yen in total company revenue — a figure that includes cameras, optical equipment, and other divisions, not just chipmaking tools.
Where does Nikon see an opening against ASML?
Nikon’s strategy targets a specific vulnerability in ASML’s armor: the massive and growing demand for ArF immersion tools that are not necessarily at the absolute cutting edge. Even for 3nm-class advanced chips, the majority of patterning steps are performed using ArF immersion lithography. EUV is reserved for only the most critical layers; the remaining dozens of steps rely on DUV systems. For foundries and memory makers running high-volume manufacturing, the cost of these tools matters enormously. ASML’s most advanced ArF immersion systems are estimated to cost around $82.5 million (approximately 13.1 billion yen) per unit. That is a substantial capital outlay, and if Nikon can offer comparable performance at a lower price, the value proposition becomes compelling.
Omura has confirmed that the company is already in advanced discussions with several major US and Asian semiconductor manufacturers regarding new ArF tool orders, stating that negotiations are “at a stage close to receiving orders.”
What is Nikon’s compatibility strategy, and why does it matter?
Price alone will not win back customers who have spent years building processes around ASML tools. Recognizing this, Nikon is pursuing what may be its most strategically significant move: mask compatibility with ASML systems.
Historically, Nikon’s lithography tools suffered from a critical drawback. Because its lens design philosophy differed from ASML’s, photomasks — the circuit pattern templates — created for ASML tools would produce reversed transfer patterns when used on Nikon machines. This meant that any customer wanting to switch to Nikon had to prepare a separate set of dedicated masks, a costly and time-consuming barrier that effectively locked users into the ASML ecosystem.
Nikon’s next-generation ArF immersion prototype, designated S6xx (with a numerical aperture of 1.35), scheduled for introduction in fiscal 2028, is designed specifically to eliminate this obstacle. The tool will pursue mask compatibility with ASML’s systems, meaning customers can use the same photomasks on both platforms. Additionally, Nikon is miniaturizing the system so it fits within the same footprint as ASML’s tools, further reducing the friction of switching suppliers.
The S6xx prototype targets the exact segment where customers feel the most pain: they want alternatives to sole-source dependency, and they want them without disrupting existing process flows.
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How does Nikon’s vertical integration give it a cost advantage?
The confidence behind Omura’s price commitment rests on a fundamental difference in manufacturing philosophy between the two companies. ASML grew into a giant by assembling technology from around the world — its lenses come from Germany’s Zeiss, its light source was acquired through the 2013 purchase of US-based Cymer, and its broader ecosystem depends on a sprawling global supply chain. This “open innovation” model drove ASML’s technological leapfrog, but it also carries significant costs and supply chain complexity.
Nikon, by contrast, operates a vertically integrated model. The company manufactures its own lenses — the single most critical optical component in any lithography system — along with other key subsystems. What was once a disadvantage, locking Nikon into internal development cycles that could not match the pace of ASML’s consortium-based approach, now becomes a structural cost advantage. Omura’s assertion that Nikon is “advantageous in cost competition” is not empty rhetoric; it is grounded in the fundamental economics of building complex optical systems in-house versus procuring them from external suppliers at markup.
Can Nikon really win back lost customers?
The most significant question hanging over Nikon’s strategy is whether lower prices and mask compatibility will be sufficient to reverse years of customer attrition. During its peak, Nikon’s ArF immersion business depended heavily on Intel, which at one point accounted for approximately 80 percent of Nikon’s lithography tool orders. But Intel’s manufacturing struggles and reduced capital spending have eliminated that anchor customer. Meanwhile, ASML used the intervening years to deepen its relationships across the industry, building long-term R&D partnerships and dual-stage technology that locked in foundry and memory customers.
Semiconductor manufacturing equipment is not a commodity. The decision to adopt a lithography platform involves years of process development, dedicated support infrastructure, software ecosystem integration, and upgrade path planning. ASML has constructed a formidable “stickiness” that goes well beyond the initial purchase price. Whether price and compatibility alone can break that grip remains an open question.
What tailwinds support Nikon’s timing?
Despite the skepticism, Nikon’s timing benefits from two powerful market dynamics. First, the AI-driven boom in chip demand has created unprecedented pressure on lithography tool supply. ASML’s enormous order backlog tells its own story: chipmakers are waiting years for delivery. Any supplier that can offer a credible alternative, especially one that does not require mask requalification, will find a receptive audience. The “single-source risk” concern is real, and procurement teams are actively looking to diversify.
Second, Nikon occupies a unique position as the only alternative to ASML for ArF immersion tools. Canon, the other Japanese lithography contender, has chosen a different technological path — pursuing nanoimprint lithography (NIL) and ArF dry systems — and does not compete directly in the immersion segment. This gives Nikon a structural advantage that no other company can replicate. In the ArF immersion market, it is ASML and Nikon, and no one else.
The pivotal moment arrives in 2028
Nikon abandoned EUV development more than a decade ago, effectively ceding the frontier of extreme miniaturization to ASML. The company knows it cannot win a race to the most advanced nodes. That is precisely why it is fighting on ground of its own choosing: the mature, high-volume ArF immersion segment, where performance is well understood and the decisive factors are cost per wafer and total cost of ownership.
Omura’s strategy represents a pragmatic acknowledgment that Nikon’s strength lies not in chasing the absolute limit of lithography, but in delivering capable, cost-effective tools that get the job done for the vast majority of patterning steps in modern chip fabrication. The S6xx prototype and its 2028 target represent the first real test of whether that vision can translate into commercial reality.
For the semiconductor industry, the stakes extend beyond Nikon’s corporate fortunes. A viable second source for advanced lithography tools would reshape supply chain dynamics, increase negotiating leverage for chipmakers, and reduce the systemic risk of depending entirely on a single supplier. Whether Nikon can execute its plan — delivering competitive performance, genuine mask compatibility, and a compelling price advantage — will determine whether the lithography market remains a one-company show or reopens as a two-player contest.
