**China’s 50% Domestic Equipment Requirement for Chip Factories: Driving Semiconductor Self-Reliance**
China has introduced a policy requiring semiconductor manufacturers seeking approval for new or expanded chip factory capacity to use at least 50% domestically made equipment. While this mandate is not explicitly codified in public law, insiders confirm that authorities enforce it through rigorous procurement reviews linked to plant construction.
### What Is the 50% Domestic Equipment Requirement?
The requirement compels chipmakers to prove that at least half of their semiconductor manufacturing tools are produced locally before receiving state approval. Procurement tenders must specify the origin of equipment, and non-compliance often leads to outright rejection of applications.
Although there is some flexibility for advanced production lines where local alternatives are still developing, the long-term goal is to increase domestic equipment ratios, ultimately targeting full localization of semiconductor manufacturing tools.
### Strengthening Domestic Supply Chains Amid US Export Curbs
This policy ramped up in response to 2023 U.S. export restrictions targeting advanced AI chips and semiconductor tools. These restrictions have limited shipments of critical technology from the U.S., Japan, South Korea, and Europe, pushing Chinese chipmakers to pivot aggressively towards domestic suppliers.
Applications that fail to meet the 50% domestic equipment threshold face rejection, even if foreign equipment remains available. For cutting-edge processes, regulators offer limited waivers but require clear localization roadmaps as part of their approval criteria.
Reflecting this shift, public procurement data reveals 421 orders for domestic lithography tools and related parts this year alone, valued at approximately 850 million yuan. This surge underscores Beijing’s strategic push to build a self-sufficient semiconductor ecosystem.
### Local Manufacturers Gain Momentum
Domestic equipment makers are reaping significant benefits from this mandate. For example, Naura Technology—a leading Chinese supplier—has seen sales jump 30% to 16 billion yuan, while Advanced Micro-Fabrication Equipment Inc. (AMEC) reported an impressive 44% increase to 5 billion yuan in early 2025.
Insiders note that before the 2023 U.S. restrictions, fabs like SMIC predominantly used U.S.-made tools, sidelining Chinese suppliers. “That changed with the export controls, when Chinese fabs had no choice but to work with domestic suppliers,” said a former Naura employee.
Naura now tests critical etching equipment on SMIC’s 7nm lines after successful deployment on 14nm processes. Their offerings, including high-layer memory etching and electrostatic chucks, increasingly replace foreign-serviced parts from companies like Lam Research.
Patent activity from leading domestic firms reflects this growth trajectory: Naura filed 779 patents in 2025—more than double the number from 2020-2021—while AMEC filed 259 patents. Analysts estimate China has already achieved around 50% self-sufficiency in key areas like photoresist removal and cleaning tools.
### National Strategy Under President Xi Jinping
President Xi Jinping emphasizes semiconductor independence as a national priority, mobilizing thousands of engineers across state labs, companies, and research institutes. This “whole nation” approach integrates innovation, manufacturing, and funding to gradually erode foreign dominance in critical semiconductor equipment sectors such as etching and lithography.
Recently, Chinese scientists unveiled a new prototype chip production system that defies U.S. restrictions, signaling progress towards advanced domestic capabilities.
### Frequently Asked Questions
**Q: What percentage of domestic equipment must Chinese chipmakers use for factory approvals?**
A: At least 50% of semiconductor manufacturing equipment must be domestically sourced, with preferences for higher ratios and an ultimate goal of 100% localization.
**Q: Why is China pushing chip factories to increase domestic sourcing?**
A: To reduce reliance on foreign technology amid U.S.-led export controls, accelerate self-sufficiency in semiconductor manufacturing, and foster local supplier growth for resilient supply chains.
### Conclusion
China’s 50% domestic equipment requirement marks a crucial step in its semiconductor self-reliance journey, reshaping global supply chains amid geopolitical tensions. Domestic champions like Naura Technology and AMEC are expanding their market share, accelerating innovation, and hitting critical production milestones.
As domestic capabilities continue to mature, Chinese chipmakers face growing pressure to localize fully. Monitoring these developments will provide valuable insights into the evolving global semiconductor landscape.
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*Stay tuned for more updates on China’s semiconductor policies and industry developments.*
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