What's Happening?
China has implemented a new requirement for local microchip manufacturers to use at least 50% domestically produced equipment in the construction or expansion of their plants. This move is part of Beijing's strategy to reduce reliance on foreign technology
following the United States' tightening of export controls on advanced chips and manufacturing equipment in 2023. Although not officially announced, companies seeking government approval for new capacity must demonstrate compliance with this requirement through tenders. The policy aims to bolster Chinese suppliers, with increased order volumes and revenue growth for companies like Naura and AMEC, while foreign manufacturers face declining market positions in China.
Why It's Important?
This policy shift is significant as it represents China's strategic push towards technological self-sufficiency in the semiconductor sector, a critical industry for global technology and economic power. By mandating the use of domestic equipment, China aims to insulate its tech industry from international trade tensions and sanctions, particularly those imposed by the U.S. This could lead to increased investment in Chinese manufacturing infrastructure and potentially alter global supply chains. However, the policy may also pose challenges, such as logistical and technological hurdles, which could impact the speed of new line deployments and pricing strategies.
What's Next?
As China continues to implement this policy, it is likely to further invest in developing domestic capabilities to eventually replace foreign technology entirely. This could lead to increased competition in the global semiconductor market, with potential implications for international trade relations. The U.S. and other countries may respond with their own measures to protect their technological interests, potentially escalating trade tensions. Additionally, the policy's impact on global supply chains and pricing could influence the strategies of multinational companies operating in the semiconductor industry.
