In 2025, the semiconductor equipment market in Chinese Mainland will decline by 6% year on year?

According to TechInsights, China's investment in wafer manufacturing equipment is expected to decrease from $41 billion in 2024 to $38 billion in 2025, a year-on-year decline of 6%. In recent years, most of China's wafer manufacturing equipment investment is driven by hoarding, because chip manufacturers in Chinese Mainland try to obtain relevant wafer manufacturing equipment before the additional restrictions in the United States come into effect. However, with more stringent export restrictions and chip oversupply in the United States, investment in wafer manufacturing equipment in Chinese Mainland will shrink.

Although the sales of China's wafer manufacturing equipment market this year decreased by $3 billion compared with 2024, the expenditure of $38 billion still means that Chinese Mainland will continue to become the world's largest wafer manufacturing equipment market, followed by Taiwan, China, South Korea and the United States.

Previous data showed that in 2023, Chinese companies purchased wafer manufacturing equipment worth US $36.6 billion, paid a total of US $16.94 billion to Korean companies, and Taiwan, China entities purchased wafer manufacturing equipment worth US $19.62 billion. By contrast, according to SEMI data, American chip manufacturers are closely behind with $12.05 billion.

Although US sanctions have restricted China's access to advanced semiconductor production technologies (especially those used for artificial intelligence and supercomputers), China has made significant progress in mature node chips, increased production, and made progress among competitors in the US and Taiwan, China. This niche market includes older but widely used process technologies such as 28nm, 45nm, 90nm, and 130nm.

Although this expansion has strengthened the position of Chinese Mainland in the market, SMIC recently warned that due to weak demand for consumer electronics products, this may affect profitability, because consumer electronics products (chips produced on many mature nodes use these chips).

It should be noted that analysts and market observers from outside China mainly track the sales of western tools to Chinese Mainland. At the same time, foreigners have relatively limited understanding of the situation of Chinese wafer manufacturing equipment suppliers. The latter's sales and market share have grown to record levels in 2024. Companies such as AMEC and Naura specialize in etching and chemical vapor deposition (CVD) tools, produce world-class equipment, and are expected to defeat American semiconductor equipment giants such as Applied Materials, Lam Research, and Kelei in Chinese Mainland.

However, as domestic chip manufacturers still heavily rely on foreign suppliers to produce lithography machines, China is still working hard to address the key weak links in semiconductor production. At present, Chinese chip manufacturers mainly purchase tools from companies such as ASML, Canon, and Nikon, as Shanghai Microelectronics Equipment (SMEE) can only manufacture lithography equipment capable of meeting mature process technologies of 90nm and above. China is also lagging behind in testing and packaging equipment. According to TechInsights data, by 2023, Chinese domestic semiconductor equipment companies will only supply about 17% of local testing equipment and 10% of packaging equipment.