Exclusive: China mandates 50% domestic equipment rule for chipmakers, sources say
China is requiring chipmakers to use at least 50% domestically produced equipment when adding new manufacturing capacity, according to three people familiar with the matter, as Beijing intensifies efforts to build a self-sufficient semiconductor supply chain.
The requirement is not publicly documented, but companies seeking government approval to build or expand fabrication plants have been told in recent months that they must demonstrate—through procurement tenders—that at least half of their equipment will be sourced from Chinese suppliers, the sources said. Applications that fail to meet the threshold are typically rejected, although authorities may allow flexibility depending on supply constraints. For advanced production lines, where domestic tools are not yet fully available, the rules are applied more leniently.
The mandate represents one of the most significant steps China has taken to reduce reliance on foreign technology, a drive that accelerated after the United States tightened export controls in 2023, restricting sales of advanced AI chips and semiconductor manufacturing equipment to China. While those restrictions blocked access to the most advanced tools, the new rule is pushing Chinese chipmakers to choose local suppliers even in areas where foreign equipment from the United States, Japan, South Korea and Europe remains available.
“Authorities prefer it to be much higher than 50%,” one source said, adding that the long-term goal is for fabs to use entirely domestic equipment. China’s industry ministry did not respond to a request for comment.
The policy aligns with President Xi Jinping’s call for a “whole-nation” approach to semiconductor self-sufficiency, involving thousands of engineers and researchers across companies and institutes. Reuters has previously reported that Chinese scientists are working on prototypes of advanced chipmaking machines—an area Washington has sought to restrict for years.
State-linked buyers have sharply increased orders for domestic tools. Public procurement data show that state-affiliated entities placed a record 421 orders this year for Chinese lithography machines and components, worth about 850 million yuan. Beijing has also poured hundreds of billions of yuan into the sector through the “Big Fund,” which launched its third phase in 2024 with 344 billion yuan ($49 billion) in capital.
The effects are already visible. China’s largest chip equipment maker, Naura Technology, is testing its etching tools on a cutting-edge 7-nanometre production line at SMIC, sources said, after successfully deploying tools on 14-nanometre lines. Etching equipment in China was previously dominated by foreign suppliers such as Lam Research and Tokyo Electron, but is now increasingly being replaced by domestic firms including Naura and AMEC.
Naura has also developed replacement components, such as electrostatic chucks, to keep foreign tools running after overseas suppliers curtailed services following export restrictions. Neither Naura, AMEC, SMIC, Lam Research nor Tokyo Electron responded to requests for comment.
Global competitors are watching closely as foreign suppliers are gradually squeezed out of the Chinese market. Naura filed a record 779 patents in 2025, more than double its filings in 2020 and 2021, while AMEC filed 259, according to data verified by Reuters. Stronger demand has translated into financial gains: Naura’s first-half 2025 revenue rose 30% to 16 billion yuan, while AMEC reported a 44% increase to 5 billion yuan.
Analysts estimate China has now reached roughly 50% self-sufficiency in photoresist-removal and cleaning equipment, a segment once dominated by Japanese firms. Industry sources say the domestic market is likely to be led by just a handful of major players, with Naura firmly among them.
