In response to tightening U.S. restrictions on China’s semiconductor industry, Chinese companies that produce tools for chip manufacturing are experiencing a surge in demand, particularly from domestic foundries. As foreign-made equipment becomes more challenging to access, Chinese manufacturers are winning an increasing share of tenders from Chinese chipmakers.
Recent research reveals a significant shift in the industry, with local equipment manufacturers like Naura and AMEC securing a higher percentage of tenders from Chinese foundries. An analysis of 182 tenders conducted by Huatai Securities showed that 47.25% of machinery equipment tenders from Chinese foundries between January and August 2023 were awarded to local manufacturers. Moreover, from July to August 2023, Chinese suppliers won 62% of tenders, compared to only 36.3% from March to April.
This trend signifies the industry’s acknowledgment that U.S. technology import restrictions are unlikely to ease and reflects a growing commitment to self-reliance, a concept advocated by Chinese President Xi Jinping.
The Biden administration recently expanded measures aimed at China’s chip industry, aiming to prevent Beijing from obtaining advanced U.S. technologies that could enhance its military capabilities. These measures are expected to be updated annually.
Despite objections from China’s foreign ministry, Chinese foundries are increasingly turning to domestically manufactured equipment. Previously, Chinese foundries primarily experimented with Chinese-made machines when adding new capacity, but they are now testing Chinese equipment for all foreign machines and replacing them if they meet their requirements.
Companies like AMEC and Naura are receiving more orders from China’s major foundries, such as SMIC and Hua Hong Semiconductor.
Sales of equipment-related revenue for China’s top 10 domestic equipment manufacturers grew by 39% year-on-year in the first half of 2023, totaling $2.2 billion, according to CINNO Research.
While China has been stockpiling foreign-made chip equipment, these avenues are also expected to close as countries like Japan and the Netherlands consider imposing restrictions.
Analysts note that Chinese manufacturers have made substantial progress in producing equipment, especially in areas like etching and cleansing, where they compete with global leaders like U.S. firms Applied Materials Inc and Lam Research Corp.
Although challenges remain, such as sourcing extreme ultraviolet (EUV) lithography machines, Chinese-made chip equipment quality is improving rapidly. Huawei Technologies and SMIC have achieved some breakthroughs by modifying deep ultraviolet (DUV) machines from ASML, a Dutch company that specializes in advanced lithography technology.
While the road ahead is still long, the Chinese semiconductor equipment industry is making notable strides in self-sufficiency and competitiveness.