China's acquisition of chipmaking equipment is projected to decrease this year, following three years of expansion. This shift comes amid industry challenges like overcapacity and tightening U.S. sanctions. For the past two years, China has led as the largest purchaser of wafer fabrication tools, with expenditures reaching $41 billion in 2024, representing 40% of global sales, according to TechInsights.
However, a decline to $38 billion is anticipated this year, marking a 6% drop from the previous year. Consequently, China's share of global purchases will reduce to 20%, signifying the first reduction since 2021. This slowdown is attributed to export restrictions and excessive production capabilities. Despite broader market declines driven by reduced consumer electronics demand, China was a key growth driver in 2023 and 2024.
U.S. sanctions have prompted Chinese entities to stockpile equipment, aiming to counteract measures intended to limit advanced chip access for military advancements or national security threats. Despite these hurdles, progress persists, exemplified by SMIC and Huawei producing advanced chips through labor-intensive methods. Additionally, there has been significant expansion into mature-node chip manufacturing, impacting Taiwanese competitors.
SMIC recently highlighted concerns regarding oversupply risks in mature node chips. Meanwhile, domestic equipment manufacturers such as Naura Technology Group and AMEC are increasing their international presence, with Naura ranking seventh globally by sales volume. Although China strives for self-reliance in chipmaking, it still faces significant gaps, particularly in lithography systems and testing/assembly tools.
ASML remains dominant in lithography machinery, while local companies contribute only 17% of testing tools and 10% of assembly equipment within China's market. These developments underscore ongoing efforts and challenges in China's semiconductor sector amidst geopolitical tensions and evolving market dynamics. The push for autonomy continues, though critical technology areas remain reliant on foreign suppliers.
