Introduction
In the second quarter of 2024, China emerged as the world’s largest market for semiconductor manufacturing equipment, purchasing over $12 billion in chip-making tools.
This surge underscores the country’s commitment to achieving technological self-sufficiency amidst ongoing geopolitical tensions, particularly with the United States.
According to the Semiconductor Equipment and Materials International (SEMI), this demand significantly contributed to a 4% increase in global semiconductor equipment sales, even as other major markets faced contractions.
Key Highlights
- Substantial Growth: China’s chip-making equipment sales rose 62% year-on-year in Q2 2024.
- Global Market Impact: Total worldwide sales of semiconductor equipment reached $26.8 billion.
- Future Projections: SEMI forecasts a 3.4% growth in global sales for 2024, aiming for a historic high of $109 billion.
- Technological Tensions: U.S. sanctions continue to shape China’s chip-making landscape.
- ASML’s Role: China remains ASML’s largest market, accounting for nearly half of the company’s Q2 net sales.
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Strong Demand in China
China robust demand for semiconductor manufacturing equipment is driven by its strategic initiative to reduce dependency on foreign technology.
In the June quarter, the country’s investments spanned various tools essential for wafer processing, assembly, packaging, and testing.
This push aligns with China’s broader goal of enhancing its domestic chip-making capabilities in light of U.S. export restrictions.
“The semiconductor equipment market has returned to growth, driven by strategic investments to support continued strong demand for advanced technologies.”
SEMI CEO Ajit Manocha
This highlights the industry’s resilience, even amidst geopolitical challenges.
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Global Semiconductor Equipment Market Overview
The global semiconductor equipment market reached $26.8 billion in sales during Q2 2024, buoyed by China’s extraordinary demand.
In stark contrast, markets like South Korea, Taiwan, and North America reported declining sales, indicating a shift in the global semiconductor landscape.
Japan also witnessed a 6% increase in revenue, highlighting regional disparities in market performance.
SEMI projects that global sales will rise 3.4% for the entire year, reaching an unprecedented $109 billion.
This anticipated growth is expected to continue into 2025, with predictions of a robust 17% increase, emphasizing the ongoing evolution of the semiconductor industry.
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Geopolitical Landscape
The U.S.-China relationship remains fraught with tension, influencing China’s chip-making ambitions. Since 2018, the U.S. has implemented measures to block shipments of advanced chip-making equipment, including ASML’s cutting-edge lithography machines.
Recent actions, such as the Netherlands revoking an export license for ASML’s NXT: 2000i machine, exemplify the tightening grip on technology exports to China.
The restrictions have intensified as the U.S. seeks to curb China’s technological advancements. Despite these challenges, China’s demand for semiconductor equipment continues to thrive, driven by state-backed investments aimed at enhancing domestic production capabilities.
ASML’s Dominance in China
ASML, the Dutch chip-lithography giant, plays a pivotal role in China’s semiconductor landscape.
The company reported that mainland China accounted for nearly half of its net system sales of €4.8 billion (approximately $5.3 billion) in Q2 2024.
This positions China as a critical market for ASML, even as the company navigates complex export regulations.
The ongoing tension between the U.S. and China has not only affected ASML’s operations but also the broader semiconductor industry.
Chinese companies are now under increasing pressure to innovate and develop their own technologies, aiming to bridge the gap with global leaders.
Future Outlook
As China continues to invest heavily in semiconductor manufacturing equipment, the industry is poised for further growth.
SEMI’s projections indicate that while China may experience a dip in equipment sales following three years of significant investment, it will maintain its position as the leading market through 2025.
This ongoing investment is vital for China’s technological independence, especially as the country strives to close the gap with advanced semiconductor markets like the U.S. and South Korea.
The push for self-sufficiency could lead to a more competitive landscape in the global semiconductor industry.
Conclusion
China’s substantial investments in semiconductor manufacturing equipment signal its determination to become a self-sufficient player in the global tech arena.
Despite facing significant challenges from U.S. sanctions and market fluctuations, the country’s strategic initiatives have positioned it as a dominant force in the semiconductor equipment market.
As the geopolitical landscape evolves, the impact on global supply chains and technology transfer will be profound. The semiconductor industry must adapt to these changes, balancing innovation with the realities of international trade dynamics.
