China Leads Global Chipmaking Equipment Investment in 2024
In a powerful display of its semiconductor ambitions, China has outspent South Korea, Taiwan, and the U.S. combined on chipmaking equipment, investing a staggering $25 billion in the first half of 2024. This investment positions China as the world’s largest market for semiconductor manufacturing equipment, a title it continues to hold amid intensifying global competition and concerns over potential trade restrictions.
China’s Strategic Investment in Semiconductor Production
China’s massive spending spree reflects its strategy to localize chip production and reduce reliance on foreign suppliers. The country is projected to double its investment, reaching a total of $50 billion by the end of 2024. This unprecedented level of investment underscores Chinese chipmakers’ confidence in future market demand and the robustness of the semiconductor industry.
Expansion of Domestic Fab Facilities
The surge in investment is not limited to China’s leading semiconductor manufacturers, such as Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong. Over a dozen new fabrication plants (fabs) are expected to come online between 2024 and 2025, involving significant contributions from smaller and mid-sized chipmakers. Most of these new fabs focus on trailing-edge nodes, reflecting the challenges Chinese companies face in acquiring advanced tools for leading-edge technologies.
Impact on Global Chipmaking Equipment Suppliers
China’s aggressive spending has had a substantial impact on global chipmaking equipment suppliers. Companies such as Applied Materials, Lam Research, KLA from the U.S., Tokyo Electron from Japan, and ASML from the Netherlands have reported significant revenue growth attributed to Chinese orders. For instance, Chinese companies accounted for 32% of Applied Materials’ revenue and an impressive 49% of ASML’s revenue.
Global Market Trends and Future Outlook
Despite a global economic slowdown, China is the only major market to increase its investment in fab tools year-over-year. In contrast, Taiwan, South Korea, and North America have all scaled back their spending in the same period. This trend has driven the chip industry’s capital intensity to exceed 15% annually for four consecutive years since 2021.
The semiconductor industry continues to show strong growth, particularly in segments like memory chips and AI-related chips. However, sectors such as automotive and industrial chips are experiencing more moderate growth as they adjust to evolving market conditions.
