ASML’s reports for the previous two quarters show that Chinese customers already account for almost half of the largest supplier of chipmaking equipment’s revenue. Representatives of the SEMI China association are convinced that over the next three years China will spend a total of more than $100 billion on the purchase of equipment for processing silicon wafers.
Image Source: SMIC
Last year, according to DigiTimes, global shipments of semiconductor manufacturing equipment fell 1.9% in value terms, but the Chinese market grew 28.3% as local firms sought to expand capacity. According to representatives of SEMI China, the Chinese market will continue to largely determine the development trends of the global semiconductor industry. However, whether this influence will be positive or negative cannot be determined. It is necessary to monitor the pace of production expansion, price dynamics and the level of utilization of Chinese enterprises.
Now the efforts of Chinese manufacturers are focused on developing local production of chips using technologies in the range from 28 to 14 nm, since they determine the wide range of components that are subject to import substitution in China. A slightly more distant prospect is pushing Chinese chip manufacturers to start producing components using technological processes up to 7 nm inclusive. With the ban on the use of ultra-hard ultraviolet (EUV) lithography, this will not be so easy from a technological point of view.
The main expansion locations in China will be located in the vicinity of the existing SMIC, Huahong and Nexchip facilities. In 2025, China will account for the bulk of the increase in chip processing capacity using mature lithography. By the end of 2025, Chinese companies will account for a quarter of all mature process capacity among the world’s top ten chip makers. Basically, over the next year, lines will be introduced aimed at producing 28-nm and 22-nm products. The 28-nm technology will also produce chips oriented toward high-voltage operation, which is in demand given the active development of the Chinese electric vehicle market.
Technological processes coarser than 28 nm will not be able to enjoy growing demand in the foreseeable future, and therefore specialized capacities will not be sufficiently loaded with orders, and in the context of their upcoming expansion, this will contribute to lower prices for chips. If demand for electronics and electric vehicles in the Chinese market returns to growth in 2025, the utilization rate of mature chip factories will barely exceed 75%. It is also difficult to predict the dynamics of prices for chips produced using old technical processes, since customers and manufacturers constantly find ways and reasons to put pressure on each other.