China's Domestic Chip Equipment Share Reaches 35% as Beijing Pushes for Greater Self-Reliance

Domestic equipment moves ahead of Beijing's target

China's share of domestically developed semiconductor equipment reached 35% by the end of 2025, up from 25% in 2024 and above Beijing's 30% target. The increase marks progress in a campaign to reduce dependence on foreign technology as restrictions on access to advanced chipmaking equipment tighten.

The change amounts to a rise of 10 percentage points in a year. Local equipment adoption exceeded 40% in etching and thin-film deposition, two essential steps in making chips. Etching removes selected material to create tiny patterns, while deposition adds thin layers of material to a chip's surface.

Naura Technology Group and Advanced Micro-Fabrication Equipment, known as AMEC, have helped drive that growth. Their equipment is gaining ground as Chinese chipmakers face greater difficulty buying some foreign machines and receive stronger government backing to work with domestic suppliers.

China's progress is uneven, however. Domestic suppliers have become stronger in several manufacturing processes, while advanced lithography, measurement equipment and some memory technologies remain difficult areas. The result is an industry that can supply more of its own needs but still depends on foreign capabilities at critical stages.

As of January 14, 2026, the central issue is how far those gains can extend. Beijing is combining investment, purchasing requirements and support for research to turn domestic equipment manufacturers into a larger part of the production system. For foreign suppliers, that creates the prospect of losing business in areas where Chinese alternatives become practical.

Where Chinese machines are gaining ground

AMEC's etching machine designed for processes at the 5 nanometer level has entered validation for advanced production lines at Taiwan Semiconductor Manufacturing Company, or TSMC. Validation is the testing stage in which equipment is assessed for use in a manufacturing process.

Naura's oxidation and diffusion furnaces now account for more than 60% of the equipment in those categories on the 28 nanometer production lines of Semiconductor Manufacturing International Corporation, known as SMIC, China's leading foundry. A foundry manufactures chips for other companies. Oxidation and diffusion furnaces help create or modify the material layers used in semiconductor production.

Piotech has also expanded its position at Yangtze Memory Technologies, or YMTC. Its share of plasma-enhanced chemical vapour deposition equipment on YMTC's 3D NAND production lines doubled from 15% to 30%. This deposition process uses plasma to help form thin layers, while 3D NAND is flash memory built with layers stacked vertically.

Naura's etching tools are also being tested on SMIC's advanced 7 nanometer production lines. Together, these developments show how domestic suppliers are moving into more demanding work while expanding their presence in established manufacturing processes.

State funding supports the expansion

Beijing has made semiconductor self-sufficiency a national strategic priority, particularly in response to US export controls. Restrictions introduced during the Trump administration and continued under Biden sought to limit China's access to advanced technologies. China responded by intensifying efforts to build a more independent semiconductor supply chain.

The China Integrated Circuit Industry Investment Fund, commonly called the Big Fund, is central to that effort. Launched in 2014, it has committed tens of billions of dollars across several phases to chip manufacturing, design and materials.

The fund's third phase alone provided 344 billion yuan, about $47 billion, exceeding the first two rounds combined. This financial backing has supported companies including SMIC, YMTC and Naura as they expand operations and invest in research and development.

China's policy framework extends beyond funding. Its dual circulation strategy places weight on domestic consumption and innovation while maintaining selective engagement with global markets. The whole-nation system brings government, universities and industry into a coordinated effort to achieve advances in critical technologies.

Those policies share a practical objective: reducing dependence on foreign suppliers in technologies Beijing considers important to national security. Funding helps companies develop and manufacture machines, while policy support encourages chipmakers to use them.

A reported 50% rule changes purchasing decisions

China has reportedly introduced a requirement for chipmakers to use at least 50% domestically made equipment when building new fabrication plants or expanding existing ones. A fabrication plant, often called a fab, is a factory where chips are manufactured.

People familiar with the requirement describe strict enforcement, with applications usually rejected when they fail to meet the threshold. Exceptions are made for advanced production lines where suitable domestic equipment is not yet available. The requirement is therefore especially consequential in processes where Chinese suppliers already have workable alternatives.

The shift in purchasing behavior has been described in the following terms, although the speaker was not identified:

Before, domestic fabs like SMIC would prefer US equipment and would not really give Chinese firms a chance. But that changed with the 2024 export restrictions, when Chinese fabs had no choice but to work with domestic suppliers.

The reported rule gives domestic manufacturers more opportunities to place equipment in operating factories. It also connects government policy directly to purchasing decisions: a company seeking to expand production must consider where its machines come from, alongside their technical performance.

The main milestones in the investment and equipment drive span more than a decade:

• 2014: China launched the Big Fund to support its integrated circuit industry.
• 2024: Domestic equipment accounted for 25%, while export restrictions increased pressure on Chinese fabs to work with local suppliers.
• End of 2025: Domestic equipment reached 35%, exceeding Beijing's 30% target.
• January 14, 2026: The industry faced a reported 50% domestic equipment requirement for new fabs and expansions, with exceptions for advanced lines lacking suitable local machines.

Advanced lithography remains a major gap

China has achieved high levels of self-sufficiency in photoresist stripping, cleaning, etching and chemical mechanical planarization, or CMP. These processes remove temporary materials, clean chip surfaces, create patterns and smooth layers so that further manufacturing steps can proceed.

Metrology, coating and developing, lithography, and ion implantation remain weaker areas. Metrology means precise measurement and inspection. Coating and developing help prepare and reveal patterns, lithography transfers patterns onto a surface, and ion implantation changes a material's electrical properties. Foreign technology, particularly from Japan, the Netherlands and Taiwan, remains indispensable in these segments.

Dutch company ASML is the sole supplier of extreme ultraviolet lithography machines, known as EUV machines, which are essential to manufacturing the most advanced chips. Export controls have prevented ASML from selling them to China, pushing Chinese companies to develop alternatives or find other ways to advance production.

Former ASML employees have reportedly returned to China and helped efforts to reverse engineer EUV capabilities. Developing domestic equipment in this area is one of the most technically demanding parts of the self-reliance campaign.

The contrast within China's equipment sector is pronounced. Stronger adoption in etching and deposition gives domestic manufacturers a growing role, while the gaps in lithography and other precision processes keep foreign technology central to parts of the manufacturing chain.

AI chips and memory widen the challenge

Huawei and Alibaba have unveiled advances in artificial intelligence accelerators, chips designed to carry out the calculations used by AI systems. Huawei has detailed a roadmap covering three years for its Ascend chips and announced plans to make its CANN platform available as open source.

China's memory manufacturers are also part of the effort. YMTC has emerged as a leading player in NAND flash technology, while ChangXin Memory Technologies, or CXMT, is making progress in DRAM. NAND flash stores information, while DRAM provides working memory for computing tasks.

These developments matter to China's attempt to reduce reliance on foreign memory companies, including Samsung and SK Hynix. Domestic advances in processors and memory address different parts of the same computing system, making both important to the wider industrial strategy.

High-bandwidth memory, or HBM, presents another difficulty. It supplies data rapidly to processors and is critical to advanced AI computing. US export controls on advanced HBM complicate access, while Chinese firms currently lack the capability to produce HBM2E, a technology integral to sophisticated AI accelerators.

The combination of domestic AI chip development and remaining memory gaps illustrates the breadth of the task. China is working on the machines that make chips, the chips themselves and the memory that allows advanced computing systems to operate effectively.

Technology controls reshape international trade

The United States has targeted China's drive for semiconductor self-reliance, particularly Huawei and SMIC, with stringent restrictions. Washington's approach seeks to limit Chinese access to advanced capabilities while protecting the technological position of the US and its partners.

An assessment of the US strategy, with no speaker identified, expressed the calculation this way:

The US is gambling it can impair China's ability to produce advanced node chips and buy the US and partners more time to widen their lead over China.

China has responded by using its control over critical minerals, including gallium, germanium and graphite, to put pressure on the United States and its allies. The confrontation therefore extends beyond finished chips and manufacturing machines to materials used across technology supply chains.

Japan, the Netherlands and South Korea face commercial consequences as China reduces reliance on foreign equipment. Suppliers from these countries could lose market share where Chinese manufacturers become more competitive or domestic purchasing requirements redirect orders.

A more divided semiconductor market is one possible result, with China building a larger domestic supply network while other countries tighten controls around advanced technologies. National security concerns and continuing economic ties are pulling the industry in different directions.

Growth comes with investment risks

China's semiconductor industry generated $179.5 billion in revenue in 2023. Its projected compound annual growth rate for 2023 to 2027 was 7.31%. A compound annual growth rate describes the steady yearly rate that would produce the total increase over a period.

China accounts for 16% of global chip production, placing it third worldwide. State support and demand from artificial intelligence, electric vehicles and cloud computing are helping drive expansion.

Made in China 2025, or MIC25, has helped build large industrial sectors, including the broader base supporting semiconductor development. Yet industrial policies have also contributed to excess capacity and economic inefficiencies. Local governments have invested heavily in overlapping projects, creating waste and pressure on public finances.

The financial challenge is therefore broader than raising money. Companies need equipment and production capacity that customers can use economically, while governments must weigh expansion against the cost of duplicating projects. A larger domestic industry can still face weak returns where investment runs ahead of practical demand.

Talent and research support the next stage

China has used programs including the Thousand Talents Plan and the High-End Foreign Expert Program to attract overseas Chinese researchers and international specialists. These initiatives seek to reverse the movement of skilled people abroad and bring more technical expertise into domestic industry.

Education in science, technology, engineering and mathematics has also been prioritized to develop innovation capacity within China. The equipment campaign depends on people able to design machines, solve manufacturing problems and turn research into reliable production.

Chinese researchers have unveiled QiMeng, an AI platform for chip design, and achieved mass production of the world's first non-binary AI chip. These developments reflect an effort to pursue technological approaches beyond existing Western models.

Talent shortages, resistance from abroad and the complexity of advanced technologies continue to constrain progress. China's likely industrial model combines partial self-sufficiency in mature manufacturing processes with selective participation in global markets. Complete technological autonomy remains a longer term goal.

The next stage will depend on whether domestic manufacturers can extend their gains while keeping innovation and production economically viable. Other countries and companies face their own choices about competition and cooperation as Chinese suppliers take on a larger role.

Key Points

• Domestic semiconductor equipment reached 35% in China by the end of 2025, up from 25% in 2024 and above a 30% target.
• Local adoption exceeded 40% in etching and thin-film deposition, with gains by Naura, AMEC and Piotech.
• The Big Fund's third phase provided 344 billion yuan, about $47 billion, more than its first two rounds combined.
• A reported rule requires at least 50% domestic equipment in new fabs and expansions, with exceptions where suitable advanced equipment is unavailable.
• Advanced lithography, metrology and HBM remain difficult areas despite progress in other manufacturing processes.
• China generated $179.5 billion in semiconductor revenue in 2023 and accounts for 16% of global chip production.
• State support, talent programs and research are expanding domestic capabilities, while duplicated investment and foreign restrictions create continuing risks.