Manufacturing Biz #6 - Magazine - Page 17
“Before, domestic fabs like SMIC would prefer US
equipment and would not really give Chinese firms
a chance. But that changed starting with the 2023 US
export restrictions, when Chinese fabs had no choice
but to work with domestic suppliers.”
much higher than 50%,” one source told
Reuters. “Eventually they are aiming
for the plants to use 100% domestic
equipment.”
The policy marks one of Beijing’s most
forceful interventions yet in its effort to
reduce reliance on foreign semiconductor
technology, a campaign that accelerated
after US export controls were tightened
in 2023. Those restrictions limited China’s
access to advanced lithography and AIrelated tools, but the new rule goes further
by encouraging domestic suppliers even in
segments where foreign equipment from
the US, Japan, South Korea and Europe
remains commercially available.
According to Nikkei Asia, the mandate
is part of a broader drive to ensure
that capital spending within China’s
semiconductor sector directly supports
local equipment makers. Chinese fabs
that once preferred established overseas
suppliers are now under pressure
to qualify domestic tools at scale,
accelerating learning curves but also
introducing new operational risks.
“Before, domestic fabs like SMIC would
prefer US equipment and would not
really give Chinese firms a chance,” a
former employee at Naura Technology
said, as quoted by Reuters. “But that
changed starting with the 2023 US export
restrictions, when Chinese fabs had
no choice but to work with domestic
suppliers.”
Early signs suggest the policy is already
having a material impact. State-affiliated
entities placed a record 421 orders for
domestic lithography machines and
components in 2025, worth around 850
million yuan, according to procurement
data cited by Reuters. At the same time,
Beijing continues to funnel capital into
the sector via the national semiconductor
investment fund, which launched a third
phase in 2024 with 344 billion yuan ($49
billion) in backing.
Local equipment makers are emerging as
clear beneficiaries. Naura, China’s largest
semiconductor equipment supplier,
is reportedly testing its etching tools
on SMIC’s advanced 7nm production
line, building on earlier deployments
at 14nm. “Naura’s etching results have
been accelerated by the government
requiring fabs to use at least 50% domestic
equipment,” one source told Reuters,
adding that the policy is forcing rapid
technical improvement.
Analysts estimate China has now achieved
roughly 50% self-sufficiency in photoresistremoval and cleaning equipment, markets
previously dominated by Japanese
suppliers.
The shift is squeezing foreign vendors’
access to the Chinese market, raising
concerns among global equipment makers
already navigating export controls and
geopolitical uncertainty.
For China, however, the mandate
reinforces a “whole nation” approach to
semiconductors championed by President
Xi Jinping, prioritising long-term strategic
autonomy over short-term efficiency.
As new fabs come online under the 50%
rule, the policy is set to further fragment
the global semiconductor equipment
landscape, with China’s domestic
ecosystem increasingly developing
in parallel to, rather than alongside,
established international supply chains.
Join the Astute Engineer community and
stay ahead:
Join the periodic electronics industry
Astute Engineer newsletter
Content supplied courtesy of Astute.
bIZ4BIZ.ORG
17
