According to the Global Semiconductor Industry Association SEMI, in the first half of this year, China spent more on chip manufacturing equipment than South Korea, Taiwan, and the United States combined. This is happening against the backdrop of the country strongly promoting the localization of chip supplies and minimizing the risks of export restrictions from the West in the near future.
According to SEMI data, China spent $25 billion on chip manufacturing equipment in the first half of 2024, a record spending level. This strong level of spending has been maintained until July and may be on track to set another record for the entire year.
China is also expected to be the largest investor in the construction of new chip manufacturing plants, including equipment purchases, with total spending projected to reach 50 billion USD for the entire year. “We see China continuing to purchase all the equipment they can for chip manufacturing facilities based on their older processes,” said Clark Tseng, Senior Director of SEMI. “Concerns about potential restrictions (export restrictions) are also driving them to attract and secure as much available equipment as possible.”
Tseng also noted that China’s record investment in chip manufacturing equipment is driven not only by top chip manufacturers like SMIC but also by medium and small chip producers. There are at least more than 10 second-tier chip manufacturers that are also actively purchasing new tools, collectively driving overall spending.
In particular, China is the only country that continued to increase annual spending on chip manufacturing equipment in the first half of this year amidst a global economic downturn. Taiwan, South Korea, and North America are all spending less on chip manufacturing equipment compared to the same period last year. The approximately 20% growth in the semiconductor industry this year is primarily due to the resurgence in demand for memory chips, along with a surge in demand for AI-related chips. Other sectors only experienced modest growth of 3 to 5% as the automotive chip and industrial chip markets are both undergoing a period of adjustment.
China is also the largest source of revenue for leading chip manufacturing equipment suppliers, accounting for 32%, 39%, and 44% of the revenue of Applied Materials, Lam Research, and KLA from their most recent quarterly results, respectively. This market is even larger for Japan’s number one chip tool manufacturer, Tokyo Electron, which accounted for 49.9% of revenue in the second quarter, and ASML from the Netherlands, which accounted for 49% of revenue, according to the companies’ disclosures.
