After three years of continuous growth, China’s purchases of chipmaking equipment are projected to decline in 2025 due to overcapacity concerns and tighter U.S. sanctions, according to Canadian semiconductor research firm TechInsights.
China, the world's largest buyer of wafer fabrication equipment in recent years, spent approximately $41 billion on chipmaking tools in 2024, accounting for 40% of global sales. However, this figure is expected to drop by 6% to $38 billion this year, with its share of global purchases falling to 20%—marking the first decline since 2021, TechInsights’ senior semiconductor analyst Boris Metodiev revealed in an online seminar.
The slowdown comes after a period of rapid expansion, during which China played a crucial role in sustaining the global wafer fabrication sector amid a downturn in consumer electronics demand. Many of these purchases were reportedly driven by stockpiling efforts in response to escalating U.S. sanctions, which seek to restrict China’s access to advanced chip technologies. These restrictions are aimed at preventing China from developing artificial intelligence capabilities that could pose national security risks to the United States.
Despite these hurdles, China’s semiconductor firms have made notable advancements. Semiconductor Manufacturing International Corporation (SMIC), the country’s largest chipmaker, and U.S.-sanctioned telecom giant Huawei successfully produced an advanced chip in 2024, albeit through costlier and more complex processes. Additionally, Chinese manufacturers have aggressively expanded in the mature-node chip segment, increasing production capacity and gaining market share from Taiwanese competitors.
However, concerns over oversupply are emerging. SMIC recently warned of potential risks in the mature-node chip market, which could further impact industry growth.
China has also been working to reduce its reliance on foreign semiconductor equipment by strengthening its domestic manufacturing capabilities. Leading Chinese equipment makers, such as Naura Technology Group and Advanced Micro-Fabrication Equipment Inc. (AMEC), have been expanding globally. Naura now ranks as the seventh-largest semiconductor equipment maker by sales, according to TechInsights.
Despite these efforts, China remains heavily dependent on foreign suppliers for critical technologies. Lithography systems, as well as testing and assembly tools, continue to be major weak points in China's semiconductor industry. The Netherlands-based ASML, the world’s top lithography machine manufacturer, remains a key player in this sector. In 2023, Chinese companies accounted for only 17% of the testing tools and 10% of the assembly equipment used within the country.
As China navigates an increasingly challenging landscape, industry analysts will closely watch how the country adapts to shifting global semiconductor trends and intensifying geopolitical restrictions.