China mandates 50% home gear rule for chipmakers: Sources | USAEMALL.com

“WHOLE NATION” APPROACH

China’s President Xi Jinping has been ‍calling for a “whole nation” effort to build a fully self-sufficient domestic semiconductor supply chain that involves thousands of engineers and scientists at companies and research centers nationwide. 

The effort is being made across the wide supply-chain spectrum. Reuters reported earlier this month that Chinese scientists are working on a prototype of a machine capable of producing cutting-edge chips, an outcome that Washington has spent years trying to prevent.

“Before, domestic fabs like SMIC would prefer US equipment and would not really give Chinese firms a chance,” a former employee at local equipment maker Naura Technology said, referring to the Semiconductor Manufacturing International Corporation.

“But that changed starting with the 2023 US export restrictions, when Chinese fabs had no choice but to work with domestic suppliers.”

State-affiliated entities placed a record 421 orders for domestic lithography machines and parts this year worth around 850 million yuan, according to publicly available procurement data, signalling a surge in ‌demand for locally developed technologies. 

To support the local chip supply chain, Beijing has also poured hundreds of billions of yuan into its semiconductor sector through the “Big Fund”, which established a third phase in 2024 with 344 billion yuan (US$49 billion) in capital.

WINNERS AND LOSERS

The policy is already yielding results, including in areas such ‍as etching, ‌a critical chip manufacturing step that involves removing materials from silicon wafers to carve out intricate transistor patterns, sources said.

China’s largest chip equipment group, Naura, is testing its etching tools on a cutting-edge 7nm (nanometre) production line of SMIC, two sources said. The early-stage milestone, which comes after Naura recently deployed etching tools on 14nm successfully, demonstrates how quickly domestic suppliers are advancing.

“Naura’s etching results have been accelerated by the government requiring fabs to use at least 50 per cent domestic equipment,” one of the people told Reuters, adding that it was forcing the company to rapidly improve.