China's Push for Semiconductor Independence

Enforcing Domestic Equipment Usage

In a significant move to reduce its dependence on foreign technology, the Chinese government has begun enforcing a rule that requires chip manufacturers to use at least 50% of domestic equipment for new factory capacity additions ¹

. This policy, although not officially announced, has been communicated to chip producers through the tender process for new or expanded factory projects.

Background and Motivation

The motivation behind this policy stems from the US export restrictions imposed on China in 2023, which included a ban on the sale of advanced AI chips and certain semiconductor manufacturing equipment to China ². While these restrictions primarily targeted the most advanced technologies, the 50% rule is pushing Chinese chip manufacturers to opt for domestic suppliers even in sectors where US, Japanese, Korean, or European equipment is available.

Implementation and Flexibility

The rule is applied stringently, with applications not meeting the 50% threshold generally being rejected, although exceptions are made when domestic supply is insufficient ³. For the production of the most advanced chips, the rule is applied more flexibly, acknowledging that domestic technology may not yet be fully ready to replace foreign equipment.

Targets and Ambitions

According to sources, the government would ideally like the percentage of domestic equipment used to be much higher than 50%, with a final target of 100% ¹

. This ambition underscores China's commitment to achieving self-sufficiency in the semiconductor sector.