In 2024, China invested $25 billion in semiconductors — more than the United States, Taiwan, and South Korea combined

China has become the largest buyer of chip manufacturing equipment. In the first half of 2024, Chinese companies invested $25 billion in semiconductor production.

China’s investments exceeded the expenditures of South Korea, Taiwan, and the United States in this area. In 2024, China is expected to spend $50 billion on chip factories. Against the backdrop of sanctions Chinese companies seek to localize production as much as possible in their own country. In 2024 and 2025, more than a dozen of these factories are expected to be launched.

Investments are not limited to the largest manufacturers, such as Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong, medium and small enterprises are also involved. The investments have allowed China to maintain its position as the world’s largest market for chip manufacturing equipment. Almost all of the new Chinese fabs are focused on the final stages of production, as it is difficult for them to obtain advanced processes.

China is the only major market that increased production costs year-on-year, despite the global economic slowdown. In contrast, Taiwan, South Korea, and North America reduced their investments in semiconductor equipment.

Rising costs in China also had a significant impact on other chipmakers. Companies such as the US-based Applied Materials, Lam Research and KLA, Japan’s Tokyo Electron, and the Netherlands’ ASML. The companies reported an increase in profits from Chinese customers. Their contribution to profits ranges from 32% (Applied Materials) to 49% (ASML).

Aggressive purchases by China have led to a 15% annual increase in the capital intensity of the chip industry for four consecutive years. Like global semiconductor sales, this indicator is key to monitoring the balance of supply and demand in the industry. Overall, the outlook for the semiconductor industry remains good. Growth in 2024 was mainly driven by demand for memory chips and artificial intelligence processors.

Sources: Nikkei, Tom`s Hardware