China’s Chipmaking Equipment Purchases Set to Decline Amid Sanctions and Overcapacity Concerns
China’s chipmaking equipment purchases, which had seen consistent growth for the past three years, are expected to decline in 2025, according to consultancy TechInsights. The nation’s chip sector, which has been the largest global purchaser of wafer fabrication equipment, is predicted to spend $38 billion this year, a 6% drop from 2024. This decline marks the first decrease in China’s semiconductor purchases since 2021, attributed to overcapacity and mounting restrictions imposed by U.S. sanctions.
China’s spending accounted for 40% of the global market for wafer fabrication tools in 2024, reaching $41 billion. However, due to increased export controls and an oversupply of chips, the country’s market share is set to fall to 20% this year. TechInsights senior analyst Boris Metodiev explained that these shifts were influenced by both geopolitical factors and the global market downturn in the semiconductor sector, particularly in consumer electronics.
Despite challenges from the U.S., China has made significant strides in chip production, particularly through stockpiling efforts in response to export restrictions. Chinese companies like SMIC and Huawei, both heavily impacted by U.S. sanctions, have managed to produce advanced chips by employing more expensive, labor-intensive methods. In addition, China’s chip firms have expanded into mature-node chips, capturing market share from Taiwanese competitors, although SMIC has now warned of the risks associated with oversupply in this segment.
Chinese equipment manufacturers have also made notable progress, with companies like Naura Technology Group and AMEC expanding their global presence. Naura has become the seventh-largest global equipment maker. However, despite these advances, China continues to face challenges in producing certain advanced equipment, particularly in areas like lithography, testing, and assembly tools, where foreign companies dominate. ASML, based in the Netherlands, remains the world leader in lithography machines, which are crucial for advanced chip manufacturing.
While China continues to work toward greater self-sufficiency in its chipmaking capabilities, it faces ongoing struggles in key areas that limit its ability to fully replace foreign technology. This situation highlights the complex balancing act China faces in its semiconductor industry, as it contends with both internal challenges like overcapacity and external pressures from international trade policies.
SOURCE: Reuters