China’s Chipmaking Equipment Purchases to Decline in 2025 Amid…

China’s chipmaking equipment purchases will decline to $38 billion in 2025, a 6% decrease, after reaching $41 billion in 2024. This reflects the first reduction in global market share due to U.S. sanctions and industry overcapacity. Chinese firms continue to advance technologically, although they still depend on foreign technologies for key areas in production.

According to consultancy firm TechInsights, China’s acquisitions of chipmaking equipment are projected to decline in 2025 after three consecutive years of growth. This downturn is attributed to overcapacity in the industry and increased limitations stemming from U.S. sanctions. Despite previously being the leading global buyer of wafer fabrication equipment, with expenditures soaring to $41 billion in 2024, China’s expected spending for 2025 is forecasted to drop to $38 billion, marking a 6% decrease year-on-year. This decline will also reduce China’s global purchasing share from 40% to 20%, representing the first downturn in purchases since 2021.

Senior semiconductor manufacturing analyst Boris Metodiev highlighted that this decrease in spending can be attributed to export controls and the overcapacity issue. In contrast, China had been a significant growth driver in the global wafer fabrication equipment market during 2023 and 2024 amidst a broader market decline influenced by reduced consumer electronics demand. Furthermore, a considerable portion of the previous purchases was motivated by stockpiling in response to U.S. sanctions aimed at restricting China’s access to critical chip technologies.

Notable Chinese firms such as Semiconductor Manufacturing International Corporation (SMIC) and Huawei have continued to innovate despite U.S. restrictions, successfully producing advanced chips through more complex and costly methods. These companies have intensified their focus on the mature-node chip sector, significantly enhancing production capabilities and capturing market share from Taiwanese competitors. However, SMIC has raised concerns regarding the risk of oversupply within the mature node chip market.

Chinese equipment manufacturers, including Naura Technology Group and Advanced Micro-Fabrication Equipment Inc. (AMEC), have been actively expanding their international presence, with Naura now ranking as the seventh-largest equipment manufacturer globally in terms of sales. While efforts to develop domestic capabilities in chipmaking equipment have progressed, Chinese firms still rely heavily on foreign technologies, particularly in lithography systems and assembly and testing tools, where local production covers only 17% and 10% respectively.

In summary, China’s chipmaking equipment purchases are set to decline due to market overcapacity and U.S. sanctions, signaling a significant downturn following a period of unprecedented growth. China’s endeavors in semiconductor manufacturing, although challenged by restrictions, demonstrate resilience through innovation and market expansion despite potential oversupply risks.

In conclusion, China’s expected decline in chipmaking equipment purchases in 2025 reflects challenges posed by overcapacity and U.S. sanctions. Despite these obstacles, Chinese firms have shown innovation and resilience, particularly in the mature-node chip sector. The ongoing efforts to enhance domestic equipment manufacturing capabilities also point toward a strategic shift in China’s approach to semiconductor self-sufficiency, although significant reliance on foreign technology persists.

Original Source: money.usnews.com