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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.

AI Chip Startup Positron Raises $23.5 Million to Challenge Nvidia

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Positron, a startup aiming to rival Nvidia in the artificial intelligence (AI) chip market, announced on Tuesday that it has raised $23.5 million in a seed funding round. Investors in the round included Valor Equity Partners, known for its support of Elon Musk’s ventures, along with Atreides Management, Flume Ventures, and Resilience Reserve.

Focus on Efficiency and Inference:

Positron’s chips are manufactured in Arizona and are designed to use less than a third of the power of Nvidia’s leading H100 graphical processing units (GPUs) while offering similar performance. The company’s chips are specifically intended for AI inference, the phase where AI models are utilized, as opposed to training the models. Although demand currently leans toward training chips, analysts forecast that the need for inference chips will rise as more AI applications are developed.

Industry Shift and Rising Costs:

With major players like OpenAI, Google, and Meta investing heavily in AI infrastructure, the demand for chips is expected to grow significantly. Meta, for example, has pledged to spend up to $65 billion this year, while Microsoft plans to invest $80 billion. OpenAI also announced a $500 billion Stargate infrastructure project. Despite Nvidia’s dominance, holding around 80% of the market, rising costs and concerns about over-reliance on a single supplier have pushed companies such as Microsoft, Meta, and OpenAI to seek alternative solutions, both in-house and externally.

MediaTek Prepares for Potential US Tariffs Amid Uncertainty

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MediaTek, Taiwan’s leading chip design firm, has been running simulations in anticipation of potential U.S. tariffs on Taiwanese goods, according to CEO Rick Tsai. Despite the uncertainty surrounding this issue, Tsai expressed confidence that the impact would be “manageable” in 2025.

Taiwan’s tech industry, including giants like TSMC, faces the risk of tariffs as U.S. President Donald Trump has proposed such measures to incentivize semiconductor production within the United States. On the campaign trail, Trump criticized Taiwan for allegedly taking U.S. semiconductor business.

Trump has outlined plans to impose tariffs on imported chips, as well as other products such as pharmaceuticals and steel, though no specific timeline has been set. When asked about the potential effects on MediaTek, Tsai referred to the situation as “very unpredictable,” but assured that the company is taking proactive measures, such as simulations, to prepare for the possible changes.

Although Tsai acknowledged the unpredictability of the situation, he believes the impact of any tariffs in the short term will be manageable, especially for 2025. “There are so many variables, so it’s very difficult to give an accurate estimate now,” he said.

In addition to trade concerns, MediaTek is facing pressure from the rise of DeepSeek, a Chinese AI startup whose lower-cost models are posing a challenge to Western tech investments in chipmakers and data centers. Despite this, Tsai remains optimistic about the AI market, noting that the spread of AI will benefit average users.

MediaTek’s shares have outperformed the broader market in 2025, showing a 7.8% gain so far, while the overall market has gained only 1.9%. However, the company’s shares closed flat on Friday.