Amid U.S. advanced semiconductor sanctions, Chinese memory semiconductor corporation Yangtze Memory Technologies Co. (YMTC) has filled 45% of its key process equipment with domestic products, according to an analysis. The self-sufficiency of China's semiconductor technology, led by pioneer corporations, is progressing at a pace that exceeds market expectations.
According to global investment bank Morgan Stanley, China's localization rate for overall wafer fab (factory) equipment is expected to rise from 14% last year to 18% this year. Among these, the localization rate for YMTC, the top manufacturer of NAND flash in China, has reached 45%. The pace of China’s semiconductor equipment self-sufficiency is accelerating, particularly around new semiconductor fabs. For Nexchip, a Chinese memory semiconductor corporation, the localization rate for its new 3rd fab (27%) has significantly increased compared to the existing 1st and 2nd fabs (15%). China’s largest foundry corporation, Semiconductor Manufacturing International Corporation (SMIC), also has a higher localization rate (22%) in its new fab (Jingcheng) compared to existing fabs (18%).
The localization trend is spreading throughout the entire Chinese semiconductor industry. The share of domestic equipment in China's foundry capital expenditures is expected to increase from 20% last year to 25% this year. In fact, local equipment corporations are accelerating technological development and showing results. Local equipment corporation Naura showcased ion implantation equipment in the first quarter of this year, while another Chinese equipment company, Advanced Micro-Fabrication Equipment, set a goal to handle 60% of the entire wafer process with its product line within the next 5 to 10 years.
Chinese semiconductor manufacturers are strengthening cooperation with domestic corporations as they are unable to import advanced semiconductor equipment manufactured in the U.S., Japan, and the Netherlands due to sanctions originating from the U.S. YMTC has secured breakthroughs by partnering with AMEC and Naura in core processes such as etching and deposition. By the end of this year, YMTC plans to begin trial operations of its first NAND flash production line built entirely with Chinese equipment. IT media Digitimes noted that once this line stabilizes, YMTC's production could double, pushing its market share globally to over 15%.
A strong domestic market triggered by artificial intelligence (AI) is cited as a driving force behind China's localization efforts. Morgan Stanley predicted that demand for AI chips in China will significantly exceed supply, leading to a surge in foundry investments in the second half of this year. Based on this demand, the projected size of the Chinese semiconductor equipment market has been revised upward from $3.66 billion to $4.03 billion.
Some point to issues of oversupply in mature processes and uncertainties in the initial yield of localization lines as limits to China’s semiconductor ambitions. However, the industry believes that since the Chinese government prioritizes semiconductor self-sufficiency, policy intent may drive the market more than short-term economic logic. There is an assessment that it will not give up on supply chain self-sufficiency, backed by astronomical state-level support, including the National Integrated Circuit Industry Investment Fund, known as China’s 'Big Fund.'
An industry source said, 'The case of YMTC is evidence that China is overcoming technological hurdles in specific fields,' adding that 'the growth of leading corporations achieving technological self-sufficiency, supported by government assistance and the domestic market, will be a key variable in the future of the global semiconductor supply chain.'