China’s Chipmaking Equipment Purchases Expected to Fall in 2025

China’s purchases of chipmaking equipment are set to decline to $38 billion in 2025, a 6% decrease from the previous year. This marks the first decline since 2021, driven by industry overcapacity and U.S. sanctions, despite Chinese firms expanding production capabilities. China remains reliant on foreign technology, especially for lithography and assembly tools, highlighting ongoing challenges in achieving self-sufficiency in chip production.

According to consultancy TechInsights, China’s purchases of chipmaking equipment are projected to decline in 2025 following three consecutive years of growth. The anticipated decrease is attributed to industry overcapacity and heightened restrictions resulting from U.S. sanctions. In 2024, China accounted for 40% of global wafer fabrication equipment sales, spending $41 billion, but this year, expenditure is expected to drop to $38 billion, marking a 6% year-on-year decline.

Despite being the sole growth driver for the global wafer fabrication sector in 2023 and 2024 amidst a downturn in the broader market, Chinese chip firms have managed to progress. Significant purchases during this time were largely due to stockpiling initiated by U.S. sanctions aimed at curtailing China’s chip production capacity essential for advancing military technologies.

China’s largest chipmaker, SMIC, and Huawei have achieved advancements in chip production using innovative but costlier methods. They have significantly increased their capabilities in mature-node chips, effectively capturing market share from Taiwan’s manufacturers. However, SMIC has indicated a risk of oversupply within this segment.

Prominent Chinese equipment manufacturers, such as Naura Technology Group and AMEC, have seen growth in international markets, with Naura now ranking as the seventh-largest equipment maker globally. However, China continues to face challenges in achieving self-sufficiency in critical chipmaking technologies, specifically lithography systems and testing tools, where it relies on foreign imports for the majority of its needs.

According to TechInsights, in 2023, Chinese companies contributed only 17% of the testing tools and 10% of the assembly tools utilized domestically. The Netherlands-based ASML remains the leading supplier of lithography machines, highlighting the ongoing reliance of China’s chipmaking industry on foreign technology for critical components.

In summary, China’s chipmaking equipment purchases are expected to decrease in 2025 due to overcapacity and U.S. sanctions. While the country has been a dominant force in the industry, challenges remain in achieving self-sufficiency, particularly in lithography and assembly technologies. Continued advancements by Chinese firms, such as SMIC and Huawei, signal resilience despite external pressures.

Original Source: money.usnews.com