China’s Chipmaking Equipment Purchases Expected to Decline in 2025

China’s chipmaking equipment purchases are expected to decline in 2025, decreasing by 6% to $38 billion. After leading global purchases for several years, the decline is attributed to overcapacity and U.S. sanctions. Despite challenges, Chinese firms have advanced their technologies and expanded their market share while relying on foreign suppliers for key manufacturing equipment.

China’s chipmaking equipment purchases are anticipated to decline in 2025 after three consecutive years of growth, as reported by a consultancy. The drop is attributed to overcapacity issues and escalating restrictions from U.S. sanctions. In 2024, China led global purchases, investing $41 billion in wafer fabrication equipment, which constituted 40% of worldwide sales. However, this year, spending is expected to decrease by 6% to $38 billion, resulting in a diminished global market share of 20%.
Boris Metodiev, a senior analyst at TechInsights, indicated that the slowdown is attributed to export controls and overcapacity. China has primarily been the engine for growth in the wafer fabrication equipment industry, simultaneously facing a decline in the broader market due to decreased consumer electronics demand. The surge in purchases was significantly influenced by stockpiling, following a series of U.S. sanctions aimed at impeding Beijing’s access to advanced chip technology.
Despite challenges posed by U.S. policies, Chinese companies like Semiconductor Manufacturing International Corporation (SMIC) and Huawei have made notable advancements, including the production of advanced chips through more complex and costly processes. Furthermore, these firms have aggressively expanded their capabilities in the mature-node chip segment, allowing them to increase production and capture market share from Taiwanese competitors.
Meanwhile, leading Chinese equipment manufacturers, such as Naura Technology Group and AMEC, are making strides on a global scale. Naura has ascended to become the seventh-largest equipment manufacturer based on sales. However, it is crucial to note that China is still dependent on foreign lithography systems, as well as testing and assembly tools, particularly where the Netherlands’ ASML dominates the market with its lithography machines. Only 17% of testing tools and 10% of assembly equipment used within China in 2023 were supplied by domestic manufacturers, underscoring China’s ongoing challenges in achieving complete self-sufficiency in chip manufacturing.

In summary, China’s chipmaking equipment acquisitions are projected to decline due to overcapacity and U.S. sanctions after a period of significant investment and growth. While the country played a pivotal role in driving global purchases, emerging challenges and dependency on foreign technology demonstrate the complexities of the semiconductor industry. Advancements by Chinese firms show progress despite external pressures, yet the sector’s dependence on international suppliers remains a critical concern for future developments.

Original Source: money.usnews.com