{"id":58032,"title":"China’s Chip Gap: The 80% Foreign Dependency Inside Semiconductor Equipment","publisher":"Stockmark.IT","author":"Stockmark.IT Website","published":"2026-08-31T13:06:34+00:00","modified":"2026-08-31T13:06:34+00:00","canonical_url":"https://stockmark.it/chinas-chip-gap-the-80-foreign-dependency-inside-semiconductor-equipment/","markdown_url":"https://stockmark.it/chinas-chip-gap-the-80-foreign-dependency-inside-semiconductor-equipment.md","json_url":"https://stockmark.it/chinas-chip-gap-the-80-foreign-dependency-inside-semiconductor-equipment.json","category":"AI","categories":["AI","Artificial intelligence","China","NVIDIA"],"tags":["China chip gap"],"featured_image":"https://i0.wp.com/stockmark.it/wp-content/uploads/2026/08/china-s-chip-gap-the-80-foreign-dependency-inside.png?fit=1536%2C1024&quality=80&ssl=1","format":"news","language":"en-GB","content":"China’s Chip Gap: The 80% Foreign Dependency Inside Semiconductor Equipment\n\nChina has made remarkable progress in building the machines that manufacture semiconductors. On the surface, the numbers are compelling: domestically produced equipment accounted for roughly 35% of the tools used in Chinese semiconductor fabs in 2025, up from about 25% a year earlier.\n\nThat is faster than China’s own localisation target. It is real industrial progress. But it is not the same thing as 35% semiconductor independence.\n\nA semiconductor manufacturing tool is not one technology. It is a supply chain in a metal enclosure. Open a Chinese-made etcher, deposition system, or thermal-processing tool and there may still be foreign RF power supplies, vacuum valves, pumps, sensors, ceramics, motion systems, and metrology components inside. Without some of those parts, the machine cannot manufacture a single chip.\n\nThe strategic question is therefore changing. It is no longer just about who assembles the visible machine. It is about who controls the specialised components buried inside it.\n\n## Key Takeaways\n\n- Chinese-made equipment reached roughly 35% of domestic fab tools in 2025.\n\n- Etching and deposition localisation exceeds 40%, driven by domestic qualification and demand.\n\n- China remains highly dependent on foreign RF power supplies and high-precision vacuum valves.\n\n- Replacing machines is easier than matching foreign tools in throughput, reliability, precision, and yield.\n\n## China’s Equipment Localisation Has Accelerated\n\nChina spent around $49 billion on semiconductor manufacturing equipment in 2025, more than any other market. With global equipment sales reaching approximately $135 billion, China has become the industry’s largest concentration of demand.\n\nThat demand gives Beijing a powerful base for building a domestic equipment industry. Chinese fabs need tools, and increasingly they are being encouraged to qualify local alternatives rather than rely entirely on American, Japanese, and European suppliers.\n\nProgress has been particularly strong in several equipment categories:\n\n- **Plasma etching**\n\n- **Thin-film deposition**\n\n- **Thermal processing**\n\nChinese companies including NAURA and AMEC have become serious competitors in these areas. Domestic adoption in etching and deposition has risen above 40%, and some individual Chinese tools already play dominant roles on certain mature-node production lines.\n\nThis matters because building complete fabrication equipment is not simply a theoretical technology exercise. Equipment suppliers need customers willing to install, test, and qualify their machines under real production conditions.\n\n## Why Export Controls Can Accelerate Chinese Substitution\n\nExport controls were designed to limit China’s access to advanced foreign semiconductor technology. They have done that in important areas. But they also create a second effect: they make dependence on overseas suppliers look far more risky.\n\nWhen access to a foreign tool or component can be restricted at any time, a domestic substitute becomes commercially and strategically valuable, even if it does not yet match the foreign option in every respect.\n\nThat changes procurement decisions inside Chinese fabs. Local equipment makers receive capital, orders, and perhaps most importantly, opportunities to qualify their products. The result is a powerful industrial feedback loop:\n\n1. A fab tests a Chinese-made machine.\n\n2. Engineers identify weaknesses in performance, reliability, or process control.\n\n3. The supplier improves the next version.\n\n4. More fabs adopt the upgraded tool.\n\n5. The supplier gains more process data, revenue, and engineering experience.\n\nRestrictions can slow China’s access to foreign technology while also speeding up the learning cycle of the domestic companies intended to replace it. Sanctions exploit dependencies, but they can also create the strongest possible incentive to eliminate them.\n\n## The Hidden Gap in Plasma Etching: RF Power Systems\n\nPlasma etching is one of China’s stronger semiconductor equipment categories. Yet even here, the deeper supply chain reveals an important dependency.\n\nAn etching chamber relies on an extremely precise radio-frequency power system. RF power turns process gas into plasma and controls the energy of charged particles that carve microscopic structures into a silicon wafer. Without that precise control, the etching process becomes unstable and defects rise.\n\nCurrent industry estimates place China’s domestic penetration in semiconductor RF power supplies at only around 20%, mainly in less demanding configurations. The global market remains dominated by specialised foreign suppliers.\n\nThat means a Chinese etching tool can still contain a critical imported heart.\n\nThe challenge is not simply generating electricity. Advanced etching can require more than 10 kilowatts of power delivered with exceptional waveform stability and fine control. At nanometre scales, tiny fluctuations can become manufacturing defects. A replacement must reproduce far more than the appearance of a power box. It must deliver precision, reliability, repeatability, and consistent process results over high-volume production runs.\n\n## Vacuum Valves: Small Components With Enormous Importance\n\nAn even less visible bottleneck lies in vacuum valves.\n\nEtching and deposition take place inside tightly controlled low-pressure chambers. Precision vacuum valves regulate chamber pressure and gas flow continuously. They are physically small compared with the overall machine, but they are essential to process stability.\n\nFor China’s highest-end semiconductor chamber valves, domestic penetration is estimated to remain below 10%. Switzerland’s VAT Group alone dominates much of the global market for precision vacuum valves.\n\nThis is where the headline figure of 80% foreign dependency becomes most meaningful. It should not be applied to China’s entire semiconductor industry as one sweeping number. It is better understood as a window into specific critical component categories where domestic penetration remains low.\n\nIn some of these hidden layers, foreign dependency may be greater than the headline figure suggests.\n\n## Semiconductor Sovereignty Means Solving Hundreds of Gaps\n\nRF power supplies and vacuum valves are only two examples. Semiconductor manufacturing equipment depends on its own ecosystem of highly specialised suppliers, including:\n\n- Vacuum pumps\n\n- High-purity quartz\n\n- Precision ceramics\n\n- Sensors\n\n- Motion systems\n\n- Metrology components\n\n- Optics and other high-precision subsystems\n\nEach category has different performance requirements, supplier relationships, manufacturing know-how, and qualification processes. There is no single “technology gap” to close.\n\nSemiconductor sovereignty is hundreds of specialised engineering gaps stacked inside one production line. Building the outer machine is a major achievement, but the remaining components can be just as difficult to replace because they require long-term experience in precision manufacturing and process consistency.\n\n## Lithography Remains the Most Famous Constraint\n\nAbove these component-level dependencies sits the most widely recognised bottleneck: lithography.\n\nChina has begun producing domestic immersion deep ultraviolet, or DUV, lithography systems. This is an important step, especially because lithography tools sit at the centre of semiconductor fabrication. But production volumes remain small, and performance still trails the systems produced by ASML.\n\nASML has stated that it has never delivered an extreme ultraviolet, or EUV, lithography machine to China. That distinction captures the wider localisation challenge perfectly.\n\nProducing a machine is not the same as matching the machine’s:\n\n- **Throughput**, or the number of wafers it can process efficiently\n\n- **Uptime**, or how reliably it stays operational\n\n- **Precision**, especially at advanced process nodes\n\n- **Yield**, or the share of usable chips produced from each wafer\n\nChina can close an availability gap before it closes a performance gap. Both matter. A tool that exists domestically may reduce supply risk, but a tool that cannot meet the required productivity and yield may still be unsuitable for the most demanding chip manufacturing.\n\n## Dependency Runs in Both Directions\n\nThe relationship is not one-sided. China depends on foreign equipment and components, but foreign equipment companies have also spent years selling into the world’s largest semiconductor equipment market.\n\nAs Chinese localisation advances, American, European, and Japanese suppliers face the risk of losing revenue in China, including in product categories where exports are still allowed. The pressure does not require a complete Chinese replacement of every foreign tool. Even partial substitution can reshape market shares in a sector where China represents such a large share of global demand.\n\nThe next stage may already be underway. Samsung and SK Hynix have reportedly evaluated Chinese AMEC equipment at fabs in China. If Chinese tools prove reliable inside global semiconductor manufacturers, localisation stops being purely defensive. It begins to look like a potential export challenge for established equipment makers.\n\n## China’s 35% Localisation Is Progress, Not Independence\n\nTechnological decoupling is not a switch that can simply be turned on or off. Semiconductor supply chains were built through decades of extreme global specialisation. The industry’s most difficult capabilities are distributed across complete machines, precision subsystems, materials, process knowledge, and manufacturing relationships.\n\nChina’s equipment localisation is neither a myth nor an accomplished state of semiconductor independence. The country has made genuine and rapid progress in visible machine categories, particularly etching, deposition, and thermal processing.\n\nBut as China replaces the visible machines, the strategic battleground moves inward. The critical contest is increasingly over RF power systems, vacuum valves, pumps, optics, sensors, precision materials, and the other components that determine whether an equipment platform can deliver stable, high-volume semiconductor manufacturing.\n\nThe enclosure may say China. The more important question is what is inside."}