Domestic semiconductor equipment has finally risen!

Domestic semiconductor equipment has finally risen!

According to data from CINNO, in the first half of 2025, there was a notable divergence in investment within China's semiconductor industry. The overall investment amounted to approximately 455 billion yuan, marking a year-on-year decrease of 9.85%. However, semiconductor equipment investment bucked the trend and increased by over 53%, signaling the accelerated rise of domestically produced equipment.

This trend is also on the rise globally. SEMI predicts that global semiconductor manufacturing equipment sales will reach $125.5 billion in 2025, representing a year-on-year increase of 7.4%, and are expected to further increase to $138.1 billion in 2026.

Among them, the sales revenue of wafer fab equipment (WFE, including wafer processing, factory facilities, and mask/reticle equipment) reached US$104.3 billion in 2024 and is expected to increase to US$110.8 billion in 2025. The core driving force behind this growth is the rapid expansion of artificial intelligence demand and the continuous upgrading of manufacturing technology.

In this wave, China is undoubtedly the main force.

In 2024, the procurement expenditure on semiconductor equipment in Chinese Mainland amounted to USD 49.6 billion, accounting for approximately 40% of the global total, with its share continuing to rise. The market share of domestically produced equipment increased from 5.1% in 2020 to 11.3% in 2024.

Breakthroughs have been made in mature process areas such as cleaning, etching, thin film deposition, and CMP. Although the self-sufficiency rate of core equipment such as EUV lithography systems for advanced processes at 7nm and below is still less than 10%, the penetration rate has increased significantly.

The path to localization of semiconductor equipment in China has been largely forced by external constraints. In the early stages, domestic manufacturers focused on accumulating technology in areas such as cleaning, etching, thin film deposition, CMP (chemical mechanical polishing), and photoresist coating and development.

Although the technical barriers in these fields are high, they are easier to penetrate compared to links such as lithography machines and EUV light sources, and are also easier to pass customer verification.

After years of accumulation, these sectors have become the main battleground for domestic substitution.

In terms of dry etching and cleaning, the market for dry stripping tools is on par with that of Japan, while the dry etching market has grown by 8%.

In terms of etching equipment, the penetration rate of NAURA and MicroSense in logic and memory chip production lines continues to increase, with some models already entering mass production lines of Yangtze Memory Technologies Co., Ltd. and Yangxin Memory Technology Co., Ltd.

In the field of CMP equipment, Huahai Qingke has achieved rapid penetration by supplying products in bulk across multiple process segments, including storage, logic, and advanced packaging.

In terms of cleaning equipment, Shengmei Shanghai's single-wafer cleaning technology has achieved global competitiveness in the fields of advanced packaging, MEMS, and power devices.

In the thin film deposition process, manufacturers such as NAURA and Shenyang Tuojing have achieved process coverage from 28nm to 14nm, and are extending towards higher processes.

In terms of glue coating and developing equipment, Xinyuan Microelectronics has continuously launched new products, steadily increasing the domestic substitution rate.

In terms of lithography, SMEE's 28nm DUV lithography machine is currently undergoing mass production testing, with the localization rate of components targeted to increase from 35% to 70%.

The localization rate is rapidly increasing. In 2024, the comprehensive localization rate of wafer manufacturing equipment reached 25%, with cleaning, CMP, and PVD equipment exceeding 35%.

The proportion of domestically produced equipment in Yangtze Memory Technologies' production lines has increased from 18% in 2019 to 43% in 2024, with the debugging cycle shortened by 37%. In July, it was reported that Yangtze Memory Technologies' first production line using entirely domestically produced equipment is expected to commence trial production in the second half of 2025.

Over the past three years, uncertainties in the global supply chain, export controls, and technological blockades have continuously reinforced the willingness of domestic wafer fabs to localize. Meanwhile, precise policy and financial support have enabled equipment manufacturers to achieve qualitative improvements in research and development, engineering, and customer collaboration capabilities, shortening the cycle from trial production to mass production.

The third phase of the National Major Fund, launched in 2024, boasts a whopping RMB 344 billion in funding, with a primary focus on equipment and materials. Data indicates that a 10% increase in the localization rate of equipment can reduce chip manufacturing costs by 3%–5%, and drive approximately USD 230 million in R&D investment in upstream materials for every USD 100 million in substitution. 

Local governments are also making efforts. For example, Shenzhen has invested 20 billion yuan to build a "Silicon Valley for equipment", which has shortened the equipment verification cycle from 18 months to 9 months, accelerating the introduction of production lines. 

Of course, shortcomings still exist. Ultra-high-end equipment such as EUV lithography machines and advanced metrology tools still rely on imports. The dual-workpiece positioning accuracy of domestic lithography machines is ±2nm, which still lags behind the internationally leading ±0.5nm. The lack of EDA tools and core materials will also affect the overall competitiveness of the equipment.

Nevertheless, the long-term upward trend in global capacity expansion, AI, and high-performance computing demand indicates that the market space for domestically produced equipment will continue to expand.

Whether China can make breakthroughs in "bottleneck" areas such as EUV lithography and advanced inspection will directly affect the discourse power of domestic equipment in the global supply chain. In the coming years, Chinese equipment manufacturers will not only continue to expand their share in mature processes but may also achieve a leap from "following" to "keeping pace" in some high-end technological links.