Mainland China leaps to the world’s largest semiconductor equipment market

Purchases of semiconductor manufacturing equipment have surged in mainland China as the country struggles to wean itself off its reliance on foreign chipmakers, according to the Nikkei.

Sales of semiconductor equipment in mainland China rose 39 percent last year to $18.7 billion, while the global figure also rose 19 percent to a record $71.2 billion, according to a report released Wednesday by global trade group SEMI.

  

Driven by this growth rate, mainland China has surpassed Taiwan to become the world’s largest chip manufacturing equipment market. The spread of 5G super-fast services and a shopping spree for electronics have boosted investment in wafer foundries around the world amid the coronavirus lockdown.

The accelerated rise of the Chinese market has been linked to the inclusion of SMIC and other tech giants on a U.S. trade blacklist aimed at curbing exports to China. SMIC also previously announced a state-funded factory plan to build a $7.6 billion joint venture factory in Beijing. Other players are eager to pour money into chip-making equipment.

A global shortage of chips also provides favorable conditions for China’s drive to ramp up production. Manufacturing of chips used in home electronics and cars is often outsourced to China, where the industry already has a strong presence, although it lags behind technologically advanced chips. The country accounted for 15 percent of global chip-making capacity last year, according to the U.S.-based Semiconductor Industry Association.

Concerned about the rise of China, the United States is also taking action to stimulate domestic production. U.S. President Joe Biden signed an executive order in February to review supply chains for chips and other critical materials. He also proposed $50 billion in subsidies for the semiconductor industry.

In response to Washington’s push, Intel is expanding its chip-making operations in the United States, announcing last month a $20 billion investment to build two manufacturing plants in Arizona. The processor giant has also launched a foundry service to make chips for other companies.

In response, semiconductor equipment makers have ramped up production. Last year, Japan’s Tokyo Electron opened new production buildings in Yamanashi and Iwate prefectures, and Disco, also from Japan, is expanding its factory in Nagano.

“Our demand has not dropped and our facilities have been operating at full capacity since 2020,” said a disco company official.

The market is expected to continue growing in 2021, a source at the Japan Semiconductor Equipment Association said.

Taiwan, the second-largest market for chip-making equipment, saw sales rise a little to $17.2 billion. As in 2019, investment in foundries has been very strong. The world’s largest foundry has allocated a record $28 billion in equipment this year.

Sales in No. 3 South Korea jumped 61 percent to $16.1 billion, driven by growing demand for memory chips. Samsung Electronics’ semiconductor business is expected to spend a record $27.5 billion in capital expenditures in 2021.

According to SEMI, global sales of wafer processing equipment increased by 19% in 2020, while sales in other front-end segments increased by 4%. Packaging and assembly showed strong growth in all regions, with the market growing 34% in 2020, while total test equipment sales increased 20%.

 

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