China has rapidly become the world’s largest spender on chipmaking equipment, with an eye-watering $25 billion invested in the first half of 2024 alone. This staggering figure, more than the combined spending of South Korea, Taiwan, and the United States, underscores Beijing’s aggressive push to localize semiconductor production. As global trade tensions simmer, China is doubling down on its ability to produce critical chips independently, preparing for a future where access to foreign technology may be increasingly restricted.
An Unprecedented Push Toward Self-Sufficiency
China’s investment in semiconductor manufacturing equipment, which could top $50 billion by the end of the year, is a direct response to global supply chain vulnerabilities and the growing risk of Western trade restrictions. With semiconductors essential to everything from smartphones and cars to artificial intelligence systems, China aims to ensure a steady supply of these key components for its industries.
The surge in spending is spread across more than a dozen new fabrication plants expected to come online in 2024 and 2025. While major players like Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong are leading the charge, smaller and mid-sized chipmakers are also stepping up, contributing significantly to this monumental investment. However, the majority of China’s new fabs are focusing on mature technology nodes, as cutting-edge tools for advanced chip production remain out of reach due to export restrictions imposed by the U.S. and its allies.
Outpacing Global Competition
In a year marked by economic uncertainty, China is the only major market to increase its spending on semiconductor equipment. Taiwan, South Korea, and North America, in contrast, have all scaled back their investments in wafer fab equipment. This strategic move has solidified China’s position as the largest consumer of chipmaking tools, a status that has reverberated across the global supply chain.
Major equipment suppliers like Applied Materials, Lam Research, KLA (all based in the U.S.), Tokyo Electron from Japan, and ASML from the Netherlands are reaping the benefits. The revenue these companies generate from China has surged, with ASML reporting that nearly 49% of its income now comes from Chinese clients. This heavy spending has driven the capital intensity of the chip industry beyond 15% per year for four straight years—a key indicator of the sector’s booming demand and robust health.
The Broader Industry Impact
While China’s ambitious spending spree has boosted the global semiconductor market, it also reflects the broader health of the industry. Rising demand for memory chips and AI-related chips has fueled growth in 2024, with sectors like automotive and industrial semiconductors seeing more measured increases as they adjust to fluctuating market conditions. As a result, the global chip industry remains poised for continued expansion.
What’s Next?
China’s extraordinary level of investment may taper off in the next two years as its massive buildup of semiconductor capacity begins to normalize. Yet, the global race to expand chipmaking capacity is far from over. Southeast Asia, Europe, Japan, and the Americas are all expected to ramp up spending on semiconductor equipment in the coming years, setting the stage for a fierce competition to lead the next generation of chip production.
For now, China’s aggressive moves in the semiconductor space signal a profound shift in the global chip landscape—one that will have lasting implications for industries and economies around the world.
For further reading, check out the full article on [Tom’s Hardware https://www.tomshardware.com/tech-industry/china-spent-more-on-chipmaking-equipment-than-south-korea-taiwan-and-the-us-combined-dollar25b-in-investments-in-the-first-half-of-the-year
