While major tech hubs like Taiwan, South Korea, and the United States have reduced their year-over-year spending on chip equipment, China has bucked the trend. Driven by the need to establish new chip fabs and protect its supply chains from U.S. sanctions, China’s spending on chip equipment has reached a record $25 billion in the first half of 2023 alone.
The country is projected to invest a substantial $50 billion in chipmaking equipment this year, a significant part of its broader strategy to strengthen its semiconductor industry and reduce reliance on foreign technology. This surge has led to increased investments in domestic chip manufacturers, such as Changxin Xinqiao, which has received a substantial injection of funds from China’s state-backed chip investment fund.
Despite U.S. sanctions, China’s leading chipmaker, Semiconductor Manufacturing International Corporation (SMIC), has made significant strides in semiconductor technology. The company has successfully produced 7-nanometer chips since 2021 and is now developing 5-nanometer chips using alternative methods. While this technology may still lag behind the industry’s leading-edge capabilities, it represents a major milestone for China’s semiconductor industry.
To maintain long-term competitiveness beyond 5nm nodes, China will still need to acquire or develop advanced lithography equipment like EUV machines. These machines are essential for producing the most cutting-edge chips, and their availability will be crucial for China’s continued growth in the semiconductor sector.