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China’s Chipmaking Equipment Purchases Expected to Decline in 2025

China’s chipmaking equipment purchases are projected to decline to $38 billion in 2025, down from $41 billion in 2024, marking the first drop since 2021. This downturn is influenced by industry overcapacity and U.S. sanctions. Chinese firms continue to expand in mature-node chips, while facing challenges in lithography and testing tool production.

According to a consultancy report, purchases of chipmaking equipment by China are anticipated to decline in 2025 following three years of growth. This downturn is attributed to issues related to overcapacity within the industry and the increasing impact of U.S. sanctions. China has been the leading purchaser of wafer fabrication equipment, accounting for a significant 40% of global sales in 2024, totaling $41 billion in expenditures. However, projections suggest this figure will drop to $38 billion this year, representing a 6% decline year-on-year, and signaling the first reduction in purchases since 2021. The consultancy, TechInsights, highlighted the slowdown in spending as a reaction to both export controls and the existing overcapacity within the sector.

In 2023 and 2024, China served as a key driver of growth in the global wafer fabrication equipment market despite an overall industry downturn due to decreased demand for consumer electronics. The purchasing spree was partially prompted by strategic stockpiling in response to the imposition of U.S. sanctions aimed at limiting Beijing’s access to advanced chip manufacturing capabilities. Notwithstanding these challenges, major Chinese firms like SMIC are making headway and producing advanced chips through alternative, albeit costlier, methods, with significant expansion into mature-node chip production, allowing them to capture market share from Taiwanese competitors.

As competition in the sector intensifies, SMIC has identified potential oversupply risks in the mature node chip segment. Additionally, prominent Chinese equipment manufacturers, such as Naura Technology Group and AMEC, are enhancing their global presence, with Naura now ranking as the seventh-largest equipment vendor worldwide. Despite these advancements, China continues to face significant hurdles, particularly in acquiring lithography systems and testing and assembly tools. Currently, domestic companies in China account for only a small fraction—17%—of testing tool production and 10% of assembly equipment utilized in the country, according to TechInsights. The leading global lithography machine manufacturer remains ASML of the Netherlands, highlighting the ongoing reliance on foreign technologies.

In summary, China’s chipmaking equipment purchases are expected to decline in 2025 due to overcapacity challenges and enhanced U.S. restrictions. Despite being a leading player in global semiconductor manufacturing, Chinese companies face formidable obstacles, particularly in lithography systems and testing capabilities. The trajectory of China’s chip industry will depend on its ability to navigate these constraints while increasing domestic production capacity.

Original Source: money.usnews.com

Sofia Rodriguez is a multifaceted journalist with a passion for environmental reporting and community issues. After earning her degree in Environmental Science from the University of Florida, Sofia transitioned into journalism, where she has spent the last decade blending her scientific knowledge with storytelling. Her work has been pivotal in raising awareness about crucial environmental issues, making her a sought-after contributor for major publications. Sofia is known for her compelling narratives that not only inform but also encourage sustainable practices within communities.

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