Our correspondent Wu Qing reports from Beijing

On September 3, according to the latest data released by the International Semiconductor Industry Association (SEMI), in the first half of 2024, the Chinese mainland spent $25 billion (about 177.9 billion yuan) on chip manufacturing equipment, more than the United States, South Korea and other countries combined.

According to SEMI observation, in the context of the global economic slowdown, the Chinese mainland is the only region that continues to increase spending on chip manufacturing equipment year-on-year. 

Industry insiders believe that in the context of vigorously promoting the localization of chip supply and reducing the risk of further export restrictions, major countries around the world are vigorously promoting the development of the semiconductor industry and the localization of chip production. Over the past few years, the self-sufficiency rate of China's semiconductor equipment has been increasing. 

China's chip equipment purchases hit a new high more than the next few combined

SEMI data shows that China, the world's largest semiconductor equipment market, spent a record $25 billion on chip equipment in the first six months of 2024. China maintained strong spending in July and is on track for another full-year record.

In addition, data from China's General Administration of Customs show that Chinese companies imported nearly $26 billion worth of chip manufacturing equipment from January to July this year, surpassing the previous record set in the same period in 2021 ($23.8 billion). At the same time, imports of equipment used by Chinese companies to make computer chips rose 14 percent to nearly $40 billion in 2023, the second-largest amount of imports since records began in 2015.

"Previously, because the United States, Japan, the Netherlands and other countries have tightened export control measures for cutting-edge semiconductor manufacturing equipment, domestic manufacturers have turned more to purchase low-end semiconductor equipment manufacturing mature process chips." A semiconductor industry person told reporters.

Analysts believe China's record investment in chip production equipment is being driven not only by top chipmakers such as SMIC, but also by stronger growth among small and medium-sized chipmakers.

On September 3, according to the TrendForce consulting report, the output value of the world's top ten foundry companies in 2024Q2 increased by 9.6% from the previous quarter, reaching 31.962 billion US dollars as a whole. Among them, TSMC topped the list with a market share of more than 60 percent, while SMIC ranked third behind Samsung, and another company Hefei Jinghe also made the top 10 list.

It is worth noting that in the context of the global economic slowdown, China is the only country that continued to increase spending on chip manufacturing equipment in the first half of this year. The United States, South Korea and other countries spent less on chip manufacturing equipment compared to the same period last year.

Clark Tseng said: "We see China continuing to buy all the equipment for its new mature node chip manufacturing facility. Concerns about possible further export control restrictions have also prompted them to advance procurement and secure more available equipment."

China's continued investment in the global chip field has also become the largest source of revenue for the world's top chip equipment suppliers. According to the latest quarterly financial reports of Applied Materials, Pan Forest Group and Kelei, the Chinese market contributes about 44% of the revenue of Applied Materials, Pan Forest Group and Kelei.

The Chinese market is crucial for Tokyo Electronics, Japan's No. 1 chip tool maker, with 49.9% of its revenue coming from China in June, and ASML of the Netherlands with about 49% of its revenue coming from China, according to company disclosures.

The Japan Semiconductor Equipment Association forecasts that Japanese chip equipment sales will increase by 15% in 2024 and will continue to maintain double-digit growth. Tokyo Electronics, Screen Holdings and Advantest all raised their full-year forecasts when they reported results for the April-June period in response to stronger-than-expected demand.

Masato Goto, Screen's senior managing director, said: "China may be buying more than it needs, helped by the US restrictions on advanced semiconductor exports to China."

Chip industry recovery Chip equipment field accelerated to catch up

Semiconductor equipment investment is an important indicator of future market demand and a barometer of industry prospects.

After the trough of the previous two years, the semiconductor market is ushering in a recovery. Industry insiders believe that the growth of the semiconductor industry this year is mainly due to the recovery of demand for memory chips and the surge in demand for artificial intelligence-related chips. As the automotive and industrial chip markets are undergoing a market correction, the related areas have experienced only modest growth of 3% to 5%.

On the back of the overall semiconductor market recovery, Clark Tseng said, "We expect another 20% growth in 2025, which will be another important year for equipment spending."

The reporter noted that at present, major countries in the world are vigorously promoting the development of the semiconductor industry and chip localization production, and recently the United States, South Korea, Japan, India and other countries have launched a series of policies to support the development of the local semiconductor industry.

To this end, SEMI expects that as the localization trend of semiconductor production advances, annual spending in Southeast Asia, the United States, Europe and Japan will also increase significantly by 2027. SEMI industry research senior director Rui Yu Zeng pointed out that the global semiconductor equipment market this year is expected to grow 3% from last year to $109.5 billion, and next year, driven by advanced logic chips and sealed test fields, the equipment market will grow 16% from this year to $127.5 billion.

In addition, SEMI believes that China's continued acquisition boom has pushed the chip industry capital intensity to more than 15% for four consecutive years since 2021. Capital intensity, like global semiconductor sales, is an important indicator of supply and demand balance in the chip industry. "Capital intensity has been below 15 per cent for the last 30 years and now it looks like it's going to be above 15 per cent as the new normal," argues Mr Tseng.

Clark Tseng said that too high a percentage would raise oversupply concerns, but SEMI expects total spending on building new factories in China to "normalize" over the next two years.

"Chinese players can be looked at as top players so they can bridge a seemingly ten-year gap in just six to seven years." "Goto said.

The above-mentioned semiconductor industry personnel said that in the past few years, China's self-sufficiency rate of semiconductor equipment has been increasing, but it is still at a low level compared with the world's leading countries, and there is a large localization space and potential. However, as Chinese storage and Foundry manufacturers have entered the peak period of equipment procurement, the local supporting capacity of domestic key equipment has been significantly improved, and the growth is expected to accelerate.

(Edited by Zhang Jingchao Reviewed by Li Zhenghao Proofread by Zhai Jun)

Source: China Business News