China has emerged as the world’s top spender on chip-making equipment, investing a staggering $25 billion in the first half of 2024. This expenditure surpasses the combined investments of South Korea, Taiwan, and the United States, underscoring China’s aggressive strategy to localize chip production and reduce dependence on foreign technology amid increasing geopolitical tensions.
China’s unprecedented investment reflects a broader strategy to secure a stable supply of critical semiconductor components essential for various industries. The country’s semiconductor sector is gearing up for a significant expansion, with more than a dozen new fabrication plants expected to begin operations in 2024 and 2025. This surge in spending extends beyond major players like Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong, including significant investments from smaller and mid-sized chipmakers. China’s focus on end nodes highlights the challenge of acquiring advanced production tools from international suppliers.
Despite a global economic slowdown, China is the only major market to increase its fab tool spending compared to the previous year. In contrast, Taiwan, South Korea, and North America have scaled back their investments in wafer fab equipment. This shift has notably boosted revenues for chip fab tool manufacturers, with companies like Applied Materials, Lam Research, KLA, Tokyo Electron, and ASML reporting substantial increases in revenue from Chinese clients. ASML, in particular, saw nearly half of its revenue coming from China.
China’s spending spree has significantly raised the capital intensity in the chip industry, maintaining a rate above 15% per year for the past four years. This metric, alongside global semiconductor sales, serves as a crucial indicator of the industry’s supply and demand balance.
Looking ahead, while China’s semiconductor equipment spending is expected to normalize over the next two years, global investment in chip-making equipment is forecasted to rise. Southeast Asia, the Americas, Europe, and Japan are anticipated to expand their chipmaking capacities, signaling ongoing growth and diversification in the global semiconductor market.
For more details on this transformative shift in semiconductor investment, visit the full article on Tom’s Hardware.