Chipmakers in China have to use 50% local equipment
What's the story
China has mandated that chipmakers use at least 50% locally made equipment for their new factories. The move is part of Beijing's larger strategy to establish a self-sufficient semiconductor supply chain. Although the rule is not publicly documented, sources familiar with the matter told Reuters that companies seeking state approval for plant construction or expansion have been informed about this requirement.
Policy impact
Push for technological independence
The 50% rule is one of the most significant steps Beijing has taken to reduce its reliance on foreign technology. The move comes after the US imposed stricter export controls in 2023, banning sales of advanced AI processors and semiconductor equipment to China. Chinese manufacturers are now opting for domestic suppliers even when foreign equipment from countries like Japan and South Korea is available.
Procurement tenders
Flexibility in equipment sourcing
Applications that don't meet the 50% threshold are generally rejected, but authorities do provide flexibility depending on supply constraints. This is especially true for advanced chip production lines where domestically developed equipment isn't fully available yet. The Chinese government is said to prefer a higher percentage of domestic equipment usage and ultimately aims for plants to use 100% domestic equipment.
National effort
China's 'whole nation' approach to semiconductor self-sufficiency
President Xi Jinping has called for a "whole nation" approach to building a fully self-sufficient domestic semiconductor supply chain. This involves thousands of engineers and scientists at companies and research centers across China. The effort spans the entire supply-chain spectrum, with Chinese scientists even working on a prototype machine capable of producing cutting-edge chips.
Market shift
Domestic demand for lithography machines surges
State-affiliated entities have placed a record 421 orders for domestic lithography machines and parts in 2025, worth around CNY 850 million. This indicates a growing demand for locally developed technologies. To support the domestic chip supply chain, Beijing has also invested hundreds of billions of yuan into its semiconductor sector through the "Big Fund," which launched its third phase in 2024 with a capital of CNY 344 billion.
Technological advancement
Etching tools tested on SMIC's production line
China's biggest chip equipment group, Naura, is testing its etching tools on a cutting-edge 7nm production line of Semiconductor Manufacturing International Corporation (SMIC). The early-stage milestone comes after Naura successfully deployed etching tools on a 14nm line.