China has introduced a new requirement obliging chipmakers to source at least 50% of their equipment from domestic suppliers when adding new production capacity, according to people familiar with the matter. The move underscores Beijing’s determination to build a self-sufficient semiconductor supply chain amid ongoing geopolitical and trade tensions.
Although the rule has not been formally published, companies seeking state approval to build or expand fabrication plants have been informed in recent months that they must demonstrate compliance through procurement tenders. Applications that fail to meet the threshold are generally rejected, sources said, though authorities may allow some flexibility depending on supply constraints. More advanced production lines are treated more leniently, as fully domestic alternatives are not yet widely available.
The measure represents one of Beijing’s most significant steps to reduce reliance on foreign technology, a strategy that gained momentum after the United States tightened export controls in 2023. Those restrictions limited China’s access to advanced AI chips and key semiconductor manufacturing tools, accelerating efforts to strengthen local capabilities.
As a result of the 50% mandate, Chinese chipmakers are increasingly prioritising domestic suppliers even in areas where equipment from the United States, Japan, South Korea and Europe remains accessible. Officials are also encouraging firms to exceed the minimum requirement, with long-term ambitions aimed at achieving full reliance on homegrown equipment.
President Xi Jinping has repeatedly called for a nationwide mobilisation to establish a fully self-sufficient semiconductor ecosystem, involving companies, research institutes and thousands of engineers and scientists. This push spans the entire supply chain, from design to manufacturing tools.
Recent procurement data points to growing demand for local technologies. State-linked entities placed a record 421 orders for domestically produced lithography machines and components this year, worth around 850 million yuan, signalling a sharp increase in adoption of Chinese-made equipment.
Beijing has backed this drive with substantial financial support. Through its state-backed semiconductor investment vehicle, known as the “Big Fund,” authorities have channelled hundreds of billions of yuan into the sector, including a third funding phase launched in 2024 with capital of 344 billion yuan.
Industry sources say the policy is already delivering results in certain segments, such as etching equipment, a crucial stage in chip manufacturing. At the same time, the shift has reshaped competitive dynamics within the industry, forcing domestic fabs to work more closely with local suppliers after years of preference for foreign technology.
