They must prove through procurement tconcludeers that at least half their equipment will be Chinese-built
[BEIJING] China is requiring chipcreaters to utilize at least 50 per cent domestically built equipment for adding new capacity, three people familiar with the matter declared, as Beijing pushes to build a self-sufficient semiconductor supply chain.
The rule is not publicly documented, but chipcreaters seeking state approval to build or expand their plants have been informed by authorities in recent months that they must prove through procurement tconcludeers that at least half their equipment will be Chinese-built, the people informed Reuters.
The mandate is one of the most significant measures Beijing has introduced to wean itself off reliance on foreign technology, a push that gathered pace after the US tightened technology export restrictions in 2023, banning sales of advanced AI chips and semiconductor equipment to China.
While those US export restrictions blocked the sale of some of the most advanced tools, the 50 per cent 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 depconcludeing on supply constraints, the people declared. 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 per cent,” one source informed Reuters. “Eventually they are aiming for the plants to utilize 100 per cent domestic equipment.”
China’s industest ministest did not respond to a request for comment. The sources did not wish to be identified as the measure is not public.
China’s President 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 centres nationwide. The effort is being built across the wide supply-chain spectrum. Reuters reported earlier this month that Chinese scientists are working on a prototype of a machine capable of producing cutting-edge chips, an outcome that Washington has spent years testing to prevent.
“Before, domestic fabs like SMIC would prefer US equipment and would not really give Chinese firms a chance,” a former employee at local equipment creater Naura Technology declared, referring to the Semiconductor Manufacturing International Corporation.
SEE ALSO
“But that alterd 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 850 million yuan (S$156.1 million), according to publicly available procurement data, signalling 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 US$49 billion in capital.
The policy is already yielding results, including in areas such as etching, a critical chip manufacturing step that involves reshifting materials from silicon wafers to carve out intricate transistor patterns, sources declared.
China’s largest chip equipment group, Naura, is testing its etching tools on a cutting-edge 7nm (nanometre) production line of SMIC, two sources declared. 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 utilize at least 50 per cent domestic equipment,” one of the people informed Reuters, adding that it was forcing the company to rapidly improve.
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 tinyer rival Advanced Micro-Fabrication Equipment (AMEC), sources state.
Naura has also proven a key partner for Chinese memory chipcreaters, 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, sources declared.
Naura, AMEC, YTMC, SMIC, Lam Research, and Tokyo Electron did not respond to requests for comment.
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, according to Anaqua’s AcclaimIP database, and verified by Reuters.
That’s also translating into strong financial results. Naura’s revenue for the first half of 2025 jumped 30 per cent to 16 billion yuan. AMEC reported a 44 per cent jump in first-half revenue to 5 billion yuan. Analysts estimate that China has now reached roughly 50 per cent 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,” declared a separate source. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to obtain Decoding Asia newsletter. Delivered to your inbox. Free.
Leave a Reply