China’s Chipmaking Equipment Purchases Projected to Decline in 2025

China’s chipmaking equipment purchases are forecasted to decline to $38 billion in 2025 after reaching $41 billion in 2024, marking a 6% decrease and representing the first decline since 2021. The reduction is linked to overcapacity and U.S. sanctions. Despite domestic advancements, reliance on foreign technology persists.

China’s chipmaking equipment purchases are projected to decrease for the first time since 2021, according to consultancy TechInsights. The country, which had been the largest buyer of wafer fabrication equipment, spending $41 billion in 2024, is expected to reduce its spending to $38 billion in 2025, a 6% decline year-on-year. This drop correlates with an ongoing capacity surplus and tightening U.S. sanctions that impact procurement.

Despite being a major driver of growth in the global wafer fabrication equipment market over the past two years, China’s purchases reflected stockpiling efforts motivated by U.S. sanctions aimed at curbing China’s chip production capabilities. In 2023 and 2024, the country accounted for 40% of global sales, even as total market demand waned.

Chinese companies are making strides in chip production, with major firms like SMIC and Huawei overcoming sanctions to manufacture advanced chips, albeit through more complex processes. They have also gained significant traction in mature-node chip production, increasing capacity and market share at the expense of Taiwanese competitors. However, concerns of oversupply in this sector have emerged.

Top Chinese equipment manufacturers Naura Technology Group and AMEC have expanded internationally, with Naura emerging as the seventh-largest equipment manufacturer globally. Despite their advancements, China still relies heavily on foreign lithography systems and testing tools, producing only a small fraction of these essential components domestically. In 2023, Chinese firms comprised only 17% of the testing tools and 10% of assembly equipment available in the market.

In summary, China’s chipmaking equipment sector is facing a year of contraction amid overcapacity and international restrictions. While domestic manufacturers are progressing, particularly in mature-node chips, they still depend significantly on foreign technology for crucial chip fabrication processes.

China’s chipmaking equipment purchases are set to decline for the first time since 2021, attributed to an oversupply situation and increasing U.S. sanctions. Although Chinese firms continue to innovate and gain share in the market, they remain reliant on imported technology, especially in critical areas like lithography.

Original Source: money.usnews.com