China requires chipmakers to use at least 50% domestically produced equipment for new factory approvals. This unwritten policy, enforced via procurement reviews, mandates detailed origin lists in tenders. Approvals halt below the threshold, aiming for eventual 100% localization to bolster self-reliance.
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50% domestic equipment threshold for state approval on chip plant expansions.
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Procurement tenders must specify equipment origins, with rejections for non-compliance.
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Public data shows 421 domestic lithography orders worth 850 million yuan this year.
China mandates 50% domestic equipment for chip factory approvals amid US curbs. Local firms like Naura surge as Beijing pushes self-sufficiency. Explore policy impacts now. (148 characters)
What is China’s 50% domestic equipment requirement for chip factories?
China’s 50% domestic equipment requirement compels semiconductor manufacturers seeking new factory capacity to prove at least half their tools are made locally before gaining state approval. According to a Reuters report, three sources familiar with the process confirmed authorities enforce this through procurement reviews linked to plant construction. While not codified in public policy, it acts as a binding gatekeeper, with tenders requiring explicit equipment origin disclosures. Flexibility exists for advanced lines where local options lag, but the long-term goal targets higher ratios up to full localization.
How is China tightening chipmaker approvals to promote domestic supply chains?
The policy accelerated following 2023 U.S. export restrictions on advanced AI chips and semiconductor tools. These blocked key shipments from the U.S., Japan, South Korea, and Europe, prompting manufacturers to pivot to local suppliers. Applications failing the 50% test face outright rejection, even when foreign gear remains accessible. For cutting-edge production, regulators grant limited waivers but demand demonstrated localization roadmaps.
State procurement reflects the shift: data indicates 421 orders for domestic lithography tools and parts this year, totaling around 850 million yuan. Beijing supports this via the Big Fund’s third phase, launched in 2024 with 344 billion yuan ($49 billion), funding domestic innovation. President Xi Jinping describes semiconductor independence as a national priority, mobilizing thousands of engineers across firms and labs.
Frequently Asked Questions
What percentage of domestic equipment must Chinese chipmakers use for factory approvals?
Chinese authorities require at least 50% domestic equipment in new or expanded chip factories to secure approval. Sources note preferences for ratios exceeding 50%, with the ultimate aim of 100% local sourcing, as confirmed in Reuters reporting from industry insiders.
Why is China pushing chip factories to source more equipment domestically?
China enforces domestic equipment use in chip factories to reduce foreign technology dependence, especially after U.S. export controls limited access to advanced tools. This builds self-sufficiency in etching, lithography, and other processes, accelerating local firms’ growth for resilient supply chains.
Key Takeaways
- Enforcement mechanism: Unwritten 50% rule via procurement tenders halts non-compliant factory plans.
- Local supplier boom: Naura’s sales rose 30% to 16 billion yuan; AMEC up 44% to 5 billion yuan in early 2025.
- Progress milestone: Naura tests 7nm etching at SMIC, nearing 50% self-sufficiency in key areas like photoresist removal.
Conclusion
China’s 50% domestic equipment requirement for chip factories marks a pivotal step in semiconductor self-reliance, reshaping supply chains amid global tensions. Local champions like Naura Technology and Advanced Micro-Fabrication Equipment gain market share, with patent filings doubling and production milestones hit. As domestic capabilities mature, chipmakers face mounting pressure to localize fully. Monitor these trends for insights into the evolving global chip landscape.
Domestic equipment makers gaining momentum
Local firms are capitalizing on the mandate. A former Naura Technology employee noted that prior to 2023 U.S. restrictions, fabs like SMIC favored U.S. tools, sidelining Chinese suppliers. “But that changed starting with the 2023 U.S. export restrictions, when Chinese fabs had no choice but to work with domestic suppliers,” the person said.
Naura now tests etching equipment on SMIC’s 7nm lines, following 14nm successes. The policy has hastened adoption: “Naura’s etching results have been accelerated by the government requiring fabs to use at least 50% domestic equipment,” one source stated. Naura supplies high-layer memory etching and electrostatic chucks, replacing serviced parts from Lam Research.
Patent activity surges—Naura filed 779 in 2025, over double 2020-2021 levels; AMEC filed 259. First-half 2025 revenues confirm traction: Naura up 30% to 16 billion yuan, AMEC 44% to 5 billion yuan, per Reuters. Analysts peg China at 50% self-sufficiency in photoresist removal and cleaning tools.
Earlier this month, scientists unveiled a prototype for cutting-edge chip production, defying U.S. efforts. This “whole nation” push under Xi integrates labs, companies, and funding to erode foreign dominance in etching, lithography, and beyond.
Source: https://en.coinotag.com/china-reportedly-mandates-50-domestic-equipment-for-chip-factory-approvals
