China is tightening its push toward semiconductor self-reliance by requiring chipmakers to use at least 50 per cent domestically produced equipment when expanding manufacturing capacity, according to sources cited by Reuters. Although the policy has not been formally announced, companies seeking regulatory approvals are expected to demonstrate compliance through procurement records. Applications that fail to meet this threshold are often rejected, though limited flexibility is reportedly allowed in advanced chip manufacturing where domestic alternatives are still developing.
The move is part of Beijing’s broader response to escalating technology restrictions imposed by the United States and its allies. Since 2023, Washington has steadily tightened export controls on advanced chips and manufacturing tools, restricting China’s access to critical technologies. While those measures directly limit foreign supply, China’s new approach goes a step further by actively steering domestic firms toward locally produced equipment, even in cases where foreign options remain available. Officials are said to prefer even higher local content over time, with the long-term goal of building fully domestic production lines.
President Xi Jinping has repeatedly framed semiconductor self-sufficiency as a national priority, calling for a “whole nation” effort to build an independent chip ecosystem. This strategy involves close coordination between state institutions, research bodies, engineers, private companies and government-backed investors. The aim is not only to reduce reliance on foreign technology but also to ensure China can sustain its industrial and technological growth despite external pressure.
Heavy state investment has played a central role in this push. Through the government-backed National Integrated Circuit Industry Investment Fund, commonly known as the “Big Fund,” China has channelled hundreds of billions of yuan into the semiconductor sector. A major new funding round launched in 2024 further reinforced this commitment, directing capital toward equipment manufacturing, materials development and next-generation chip technologies.
These policies are already delivering visible results. Domestic equipment makers have made notable progress in key areas such as etching, a critical step in chip fabrication. Chinese suppliers are increasingly testing and deploying their tools on advanced production lines that were previously dominated by foreign manufacturers. Demand for locally produced lithography machines and components has also risen sharply, reflecting growing confidence in homegrown alternatives.
The shift is beginning to reshape the global semiconductor landscape. As Chinese firms reduce their dependence on overseas suppliers, companies from the United States, Japan and Europe are facing mounting competitive pressure. Analysts estimate that China has already achieved around 50 per cent self-sufficiency in certain equipment categories that were once almost entirely imported. While significant challenges remain—especially in cutting-edge technologies—the trajectory is clear. If current trends continue, China’s semiconductor industry could become far more independent in the coming years, with major implications for global supply chains and technological competition.
