China Outpaces Global Chip Manufacturing Equipment Spending in 2024
China is dramatically increasing its investment in chip manufacturing equipment, surpassing the combined expenditures of the U.S., South Korea, Taiwan, and Japan in the first half of 2024, according to a report from SEMI, a global semiconductor industry association.
In the first six months of this year, China spent an impressive $24.73 billion on chip manufacturing equipment, exceeding the $23.68 billion spent by the aforementioned regions combined. Notably, the U.S. accounted for the majority of the spending in North America.
This surge in investment reflects Beijing’s ambitious push towards chip self-sufficiency, driven by concerns over potential Western restrictions that could limit access to critical technology. Since the U.S. imposed tighter export controls in October 2022, China’s expenditure on chip-making equipment has skyrocketed, increasing from $28 billion in 2022 to $36.6 billion in 2023. SEMI forecasts that this figure will surpass $35 billion by the end of 2024.
Despite the surge, Clark Tseng, Senior Director at SEMI, anticipates that while the investment binge may continue into the latter half of the year, a slowdown is expected in 2025 as the industry works to manage excess capacity.
The extensive spending raises concerns about potential overcapacity and pricing pressure within the semiconductor industry. Tseng warned that such over-investment could lead to inefficient or underutilized capacity in the future.
China has made significant strides in producing older-generation chips, which are based on manufacturing nodes of at least 20 nanometers. These chips are essential for consumer electronics, automobiles, and home appliances. However, while China is making progress in this area, it still faces challenges in developing more advanced chips with smaller transistors and greater processing power.
Alex Capri, Senior Lecturer at the National University of Singapore and Research Fellow at the Hinrich Foundation, noted that U.S. export controls have effectively blocked China from accessing advanced manufacturing technologies, such as extreme ultraviolet (EUV) tools. This has created a bottleneck in China’s efforts to advance to cutting-edge chip production. Despite this, the launch of Huawei’s Mate 60 Pro smartphone featuring a 7-nanometer chip represents a significant achievement for China’s Semiconductor Manufacturing International Corporation (SMIC), though it was achieved at a higher cost and with less efficiency compared to using EUV technology.
Capri suggested that Chinese companies might be stockpiling chip-making equipment as a precaution against further potential U.S. export restrictions, especially with the U.S. presidential election on the horizon.
Despite the sweeping export curbs, China remains a crucial market for many global semiconductor equipment manufacturers. For instance, Dutch semiconductor equipment maker ASML has seen its revenue share from Chinese clients more than double, from 17% in late 2022 to 49% in the second quarter of 2024. Similarly, Tokyo Electron and Screen Holdings reported that more than 40% of their revenue in the June quarter came from China, with expectations for continued growth.
In the second quarter of 2024, equipment sales to China reached $12.21 billion, compared to $4.52 billion to South Korea, $3.9 billion to Taiwan, and $1.61 billion to Japan, according to SEMI data.
