Source: The Business Times
Date: 30th December 2025

New procurement rules require chipmakers to source at least half of their equipment domestically, reshaping global semiconductor supply chains.

China has introduced a new requirement compelling semiconductor manufacturers to ensure that at least 50% of equipment used for new capacity expansion is domestically produced. While not formally published, the rule has been communicated directly to chipmakers seeking state approval for plant construction or expansion, with compliance verified through procurement tender documentation. Applications failing to meet the threshold are commonly rejected, though limited flexibility exists where domestic alternatives are unavailable.

The policy marks one of the most decisive steps yet in China’s push to reduce reliance on foreign semiconductor technology. It follows tighter export restrictions imposed by the United States in 2023, which curtailed access to advanced chips and manufacturing tools. As a result, Chinese fabs are increasingly prioritising local suppliers, even in segments where foreign equipment from the United States, Japan, South Korea and Europe remains technically accessible.

Authorities are signalling that the 50% requirement is a minimum rather than a ceiling, with long-term ambitions pointing toward fully domestic equipment usage. However, exceptions remain for advanced production lines where Chinese-developed tools are not yet sufficiently mature. The mandate has accelerated development cycles among domestic equipment makers, forcing rapid innovation, testing and deployment across key chipmaking processes such as etching and wafer handling.

State-backed investment has played a critical role in supporting this transition. Large-scale funding initiatives and a surge in public procurement orders have boosted demand for locally produced semiconductor equipment. As a result, domestic suppliers are gaining market share, improving technical capabilities and recording strong revenue growth, while foreign vendors face a shrinking footprint in the Chinese market.

Overall, the policy underscores a structural shift in the global semiconductor ecosystem. China’s manufacturing strategy is moving from participation to dominance in selected supply-chain segments, with long-term implications for equipment suppliers, technology exporters and downstream industries dependent on chip availability.

The localisation push is likely to reshape cargo flows linked to semiconductor manufacturing. Imports of high-end foreign equipment into China may decline, while domestic equipment distribution within China increases. Shippers handling semiconductor-related cargo should anticipate changes in trade lanes, increased intra-Asia movements, and potentially lower volumes from traditional supplier countries.

Importers of foreign semiconductor equipment into China face heightened risk of reduced demand, tighter regulatory scrutiny and declining market access. Companies supplying ancillary materials, components or maintenance services may also need to reassess China exposure and diversify customer bases beyond the mainland.

Exporters of semiconductor equipment and advanced manufacturing tools are likely to feel the most direct impact. Market access to China may narrow further, accelerating the need to redirect sales toward alternative regions or invest in localisation strategies outside China. Conversely, exporters supplying raw materials, components or finished chips from China may benefit as domestic capacity expands, provided they can navigate regulatory and geopolitical risks.