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China’s Chipmaking Equipment Purchases Expected to Decline in 2025

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China’s spending on chipmaking equipment is projected to decline this year after three consecutive years of growth, driven by overcapacity and U.S. sanctions, according to a report released by Canadian semiconductor research firm TechInsights on Wednesday.

China has led global purchases of wafer fabrication equipment for the past two years, buying $41 billion worth of tools in 2024 and accounting for 40% of global sales. However, spending is expected to fall to $38 billion in 2025, a 6% year-over-year decline, with China’s share of global purchases dropping to 20%, marking the first decrease since 2021, according to Boris Metodiev, a senior semiconductor manufacturing analyst at TechInsights.

“We can see some slowdown in Chinese spending due to export controls and overcapacity,” Metodiev stated during an online seminar.

China had been a key growth driver in the global wafer fabrication equipment sector in 2023 and 2024, even as demand for consumer electronics declined globally. Much of the country’s recent equipment purchases were spurred by stockpiling in response to U.S. sanctions aimed at limiting China’s access to advanced chip technology, particularly those with potential military applications.

Despite these sanctions, Chinese companies such as Semiconductor Manufacturing International Corporation (SMIC) and Huawei have made advancements. Last year, they produced an advanced chip using more labor-intensive and costly methods. Chinese firms have also expanded significantly in the mature-node chip segment, boosting production capacity and gaining market share from Taiwanese competitors.

However, SMIC warned on Wednesday of potential oversupply risks in the mature-node chip market.

Leading Chinese equipment manufacturers like Naura Technology Group and AMEC have also expanded globally, with Naura now ranking as the world’s seventh-largest equipment maker by sales. Despite these efforts to bolster self-sufficiency, China still faces significant challenges in producing lithography systems and testing and assembly tools.

Dutch company ASML, the largest manufacturer of lithography machines, continues to dominate this sector. In 2023, Chinese companies provided only 17% of the testing tools and 10% of the assembly equipment used within the country, Metodiev added.

Apple Partners with Alibaba to Introduce AI Features for iPhones in China

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Apple has partnered with Alibaba to launch artificial intelligence features for iPhone users in China, a move aimed at addressing months of uncertainty over Apple’s AI strategy in the region, according to The Information. The collaboration could help Apple regain its competitive edge in the Chinese market, where it has been losing ground to local rivals such as Huawei, which has already incorporated AI tools into its smartphones since last year.

Apple’s stock rose by 1.5% following the news, while Alibaba’s U.S.-listed shares saw a 2.6% gain. Apple had initially chosen Baidu as its AI partner, but the Chinese company’s progress in developing models for Apple Intelligence did not meet Apple’s standards. As a result, Apple considered various other AI models from Tencent, ByteDance, Alibaba, and Deepseek but ultimately chose Alibaba for its ability to leverage vast amounts of user data related to shopping and payment habits, which could enhance model training and enable more personalized services.

The Chinese AI features co-developed by Apple and Alibaba are now under review by China’s cyberspace regulator for approval. This development is crucial as Apple’s iPhone sales declined during the holiday quarter, typically its best-performing period, largely due to the absence of AI features in its latest devices. Apple remains optimistic, forecasting strong sales growth for the current quarter.

Explainer: What Autonomous Driving Features Are Available in China?

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China, the world’s largest auto market, is seeing significant advancements in autonomous driving features, with several companies introducing innovative technologies in their vehicles. Chinese electric vehicle (EV) maker BYD recently launched its proprietary advanced driver-assistance system, “God’s Eye,” in a range of models, signaling the start of a potential price war in a highly competitive market.

BYD’s Autonomous Driving Features:

BYD’s “God’s Eye” system is a three-tier platform based on computing power. The most affordable entry-level version, the C model, is available on vehicles priced between 69,800 yuan ($9,500) and 219,800 yuan, under the Dynasty and Ocean series. The system includes features such as:

  • Automatic highway ramp exit/entry
  • Lane keeping and cruise driving
  • Autonomous lane changes and obstacle avoidance
  • Autonomous emergency braking and self-parking upon exit
  • Remote parking

This version of the system uses 12 cameras, five-millimeter wave radars, and 12 ultrasonic radars. Higher-end variations of the system, God’s Eye A and B, are available on more premium models such as Denza and Yangwang brands, utilizing advanced computing and lidar to create 3D images of a vehicle’s surroundings, assisting in navigation around obstacles.

Tesla’s Full-Self Driving (FSD):

Tesla offers its full self-driving (FSD) software for subscription in China, though the features are limited compared to other markets. Tesla vehicles come with basic autopilot features, such as traffic-aware cruise control and in-lane autosteer.

  • Enhanced autopilot, priced at 32,000 yuan, includes auto lane change and auto parking.
  • FSD, priced at 64,000 yuan, will soon allow navigation on city streets and recognition of traffic lights and stop signs, with plans for a release later this year.

Huawei-backed AITO:

AITO, another key player in China’s EV space, equips its M7 model with two versions of Huawei’s advanced driving system. The base version includes navigation on highways, auto ramp entry/exit, and partial auto lane changes, priced at 249,800 yuan. The advanced version, priced at 289,800 yuan, includes lidar-powered features, such as city street navigation and automatic emergency braking for special-shaped obstacles.

AITO’s advanced driving software is also available for subscription on EVs from other brands, including Changan’s Avatr, for approximately $4,100.

Xpeng’s MONA Series:

Xpeng introduced its most affordable EV with advanced autonomous driving capabilities through its MONA sub-brand. The MONA M03 Max, priced from 155,800 yuan, includes a vision-only solution with lane-keeping control, adaptive cruise control, navigation on highways, and smart parking. The vehicle will also feature smart exit from parking spaces.

Xiaomi’s Autonomous Driving System:

Xiaomi has introduced its own smart driving system in the SU7 EVs, priced from 215,900 yuan. The lower-end version of the system includes auto parking and highway navigation. The higher-end version, equipped with lidar, enables additional features like urban navigation, collision avoidance, and special vehicle recognition, available in SU7 trims priced above 245,900 yuan.