China is requiring chipmakers to use at least 50% domestically made equipment for adding new capacity.
The rule is not publicly documented, but chipmakers seeking state approval to build or expand their plants have been told by authorities in recent months that they must prove through procurement tenders that at least half their equipment will be Chinese-made.
The mandate is one of the most significant measures Beijing has introduced to wean itself off reliance on foreign technology. The 50% rule is leading Chinese manufacturers to choose domestic suppliers even in areas where foreign equipment from the US, Japan, South Korea and Europe remain available.
Applications failing the threshold are typically rejected, though authorities grant flexibility depending on supply constraints. The requirements are relaxed for advanced chip production lines, where domestically developed equipment is not yet fully available.
"Authorities prefer if it is much higher than 50%. Eventually they are aiming for the plants to use 100% domestic equipment."
Xi Jinping has been calling for a "whole nation" effort to build a fully self-sufficient domestic semiconductor supply chain that involves thousands of engineers and scientists at companies and research centers nationwide.
“Before, domestic fabs like SMIC would prefer US equipment and would not really give Chinese firms a chance.”
"But that changed starting with the 2023 US export restrictions, when Chinese fabs had no choice but to work with domestic suppliers."
State-affiliated entities placed a record 421 orders for domestic lithography machines and parts this year worth around 850M yuan, according to publicly available procurement data, signaling a surge in demand for locally developed technologies.
To support the local chip supply chain, Beijing has also poured hundreds of billions of yuan into its semiconductor sector through the "Big Fund", which established a third phase in 2024 with 344B yuan ($49B) in capital.
The policy is already yielding results, including in areas such as etching, a critical chip manufacturing step that involves removing materials from silicon wafers to carve out intricate transistor patterns.
China's largest chip equipment group, Naura, is testing its etching tools on a cutting-edge 7nm (nanometre) production line of SMIC. The early-stage milestone, which comes after Naura recently deployed etching tools on 14nm successfully, demonstrates how quickly domestic suppliers are advancing.
"Naura's etching results have been accelerated by the government requiring fabs to use at least 50% domestic equipment.”
Advanced etching tools had been predominantly supplied in China by foreign firms such as Lam Research and Tokyo Electron, but are now being partially replaced by Naura and smaller rival Advanced Micro-Fabrication Equipment (AMEC).
Naura has also proven a key partner for Chinese memory chipmakers, supplying etching tools for advanced chips with more than 300 layers. It developed electrostatic chucks — devices that hold wafers during processing — to replace worn parts in Lam Research equipment that the company could no longer service after the 2023 restrictions.
China's progress is being viewed with concern by global competitors, as foreign suppliers are squeezed out of the China market.
Naura filed a record 779 patents in 2025, more than double what it filed in 2020 and 2021, while AMEC filed 259.
That's also translating into strong financial results. Naura's revenue for the first half of 2025 jumped 30% to 16B yuan. AMEC reported a 44% jump in first-half revenue to 5B yuan.
Analysts estimate that China has now reached roughly 50% self-sufficiency in photoresist-removal and cleaning equipment, a market previously dominated by Japanese firms, but now locally led by Naura.
“The domestic equipment market will be dominated by two to three major manufacturers, and Naura is definitely one of them.”
reuters.com/world/china/ch
Xi Jinping has been calling for a "whole nation" effort to build a fully self-sufficient domestic semiconductor supply chain that involves thousands of engineers and scientists at companies and research centers nationwide.
“Before, domestic fabs like SMIC would prefer US equipment and would not really give Chinese firms a chance.”
"But that changed starting with the 2023 US export restrictions, when Chinese fabs had no choice but to work with domestic suppliers."
State-affiliated entities placed a record 421 orders for domestic lithography machines and parts this year worth around 850M yuan, according to publicly available procurement data, signaling a surge in demand for locally developed technologies.
To support the local chip supply chain, Beijing has also poured hundreds of billions of yuan into its semiconductor sector through the "Big Fund", which established a third phase in 2024 with 344B yuan ($49B) in capital.
The policy is already yielding results, including in areas such as etching, a critical chip manufacturing step that involves removing materials from silicon wafers to carve out intricate transistor patterns.
China's largest chip equipment group, Naura, is testing its etching tools on a cutting-edge 7nm (nanometre) production line of SMIC. The early-stage milestone, which comes after Naura recently deployed etching tools on 14nm successfully, demonstrates how quickly domestic suppliers are advancing.
"Naura's etching results have been accelerated by the government requiring fabs to use at least 50% domestic equipment.”
Advanced etching tools had been predominantly supplied in China by foreign firms such as Lam Research and Tokyo Electron, but are now being partially replaced by Naura and smaller rival Advanced Micro-Fabrication Equipment (AMEC).
Naura has also proven a key partner for Chinese memory chipmakers, supplying etching tools for advanced chips with more than 300 layers. It developed electrostatic chucks — devices that hold wafers during processing — to replace worn parts in Lam Research equipment that the company could no longer service after the 2023 restrictions.
China's progress is being viewed with concern by global competitors, as foreign suppliers are squeezed out of the China market.
Naura filed a record 779 patents in 2025, more than double what it filed in 2020 and 2021, while AMEC filed 259.
That's also translating into strong financial results. Naura's revenue for the first half of 2025 jumped 30% to 16B yuan. AMEC reported a 44% jump in first-half revenue to 5B yuan.
Analysts estimate that China has now reached roughly 50% self-sufficiency in photoresist-removal and cleaning equipment, a market previously dominated by Japanese firms, but now locally led by Naura.
“The domestic equipment market will be dominated by two to three major manufacturers, and Naura is definitely one of them.”
reuters.com/world/china/ch