China to Require Chipmakers to Use 50% Local Equipment, Sources Say

China is taking a big step in its semiconductor industry. Sources say chipmakers must now use at least 50% local equipment for new factories. While not yet official, companies seeking approval must show proof. We from the tech world see this as a key move toward China’s tech self-sufficiency and a shift in the global chip supply chain.

Why This Matters

• Chipmakers power the digital economy: They make semiconductors for smartphones, cars, AI servers, and defense systems.
• China relies on foreign machinery: For decades, advanced chipmaking equipment came mainly from the US, Japan, South Korea, and Europe.
• New rule aims to reduce dependency: Beijing wants at least 50% of equipment in new factories to be domestic.
• Shift in production value chain: The goal is to keep more semiconductor manufacturing and technology development inside China.

Background: China’s Semiconductor Goals

• Ambitious tech push: China aims to lead in semiconductors, AI, and high-tech manufacturing.
• Self-reliance priority: President Xi emphasizes reducing dependence on foreign tech.
• US export controls: Restrictions on advanced chips and equipment have sped up China’s domestic tech drive.
• Big Fund investment: China invested ~344 billion yuan (~$49 billion) in 2024 to support local chipmaking.

What the 50% Local Equipment Rule Really Means

• Requirement: Chipmakers must use at least 50% domestic equipment for new or expanding factories.
• Proof needed: Companies show compliance through procurement tenders for government approval.
• Threshold enforcement: Projects below 50% may be rejected unless supply issues exist. (Investing.com)
• Flexibility: Advanced lines get some leeway where local tools aren’t ready.
• Future target: Officials may push for 100% local equipment eventually.

Impact on Chipmakers and Global Supply Chain

Chinese Chipmakers

• Pros
  • Boost for local equipment firms.
  • Stronger, more innovative tech ecosystem.
  • Reduced long-term reliance on foreign tools.
• Cons
  • Local tools lag in advanced processes like lithography.
  • Cutting-edge production may slow initially.

Foreign Suppliers

• Shrinking market in China for US, EU, and Japanese firms.
• Major affected companies: ASML (Netherlands), Applied Materials (US), Lam Research (US), Tokyo Electron (Japan).
• May force partnerships, strategy shifts, or focus on other markets.

Global Supply Chains

• Domestic tooling changes reshape global demand.
• Could lead to fragmented ecosystems: China vs Western markets.

Technological and Economic Implications

• Local ecosystem building: China invests in tools once dominated by foreign firms.
• Key stats: Chinese firms now produce ~50% of photoresist removal and cleaning tools.
• Active players: Naura Technology and AMEC are expanding and testing advanced tools.
• Economic growth: Companies show rising revenue and patent filings.
• Weakness: High-end lithography machines are still behind leaders like ASML.

Geopolitical and Strategic Context

• Policy reflects broader tech rivalry with the US.
• US export restrictions pushed China to accelerate self-sufficiency.
• Semiconductors are now a battleground for supply chain control and national security.

 Conclusion

China’s rule requiring chipmakers to use at least 50% local equipment for new capacity is a landmark move. It marks a bold push for self-sufficiency, aiming to reduce reliance on foreign technology. The policy also gives a boost to domestic semiconductor equipment firms, helping them grow and innovate. Globally, it reshapes the semiconductor landscape and could lead to long-term changes in supply chains and tech alliances. For chipmakers and investors worldwide, this is a development worth watching closely, as it may drive local innovation while also increasing global competition and geopolitical tensions.

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Disclaimer:

The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.