In a significant move to bolster its technological independence, China has reportedly instituted a new, unpublicized mandate for its semiconductor industry. The directive requires domestic chip manufacturers to source at least half of their production equipment from local suppliers.
The "Silent" Policy and the Push for Self-Reliance
According to industry insiders cited by Reuters, this "silent" policy is not documented in public records but is being enforced through the state approval process. Chipmakers like SMIC seeking permission to build or expand fabrication plants must now demonstrate through procurement tenders that they meet the 50% local equipment threshold. Sources indicate that authorities prefer an even higher percentage, with the ultimate goal being 100% domestic equipment usage in chip plants.
This aggressive push is described as a core element of President Xi Jinping's "Whole Nation" strategy for technological advancement. While the government is allowing some flexibility for advanced production lines where Chinese alternatives are not yet available, the long-term objective is total self-sufficiency.
A Direct Response to US Export Restrictions
The policy marks a stark shift in China's approach, directly triggered by external pressure. Historically, major Chinese fabs showed a strong preference for American or Japanese-made chipmaking tools. However, the sweeping US export bans in 2023 on advanced AI chips and semiconductor manufacturing equipment forced a strategic rethink.
"Before, domestic fabs like SMIC would prefer U.S. equipment and would not really give Chinese firms a chance. But that changed starting with the 2023 U.S export restrictions, when Chinese fabs had no choice but to work with domestic suppliers," a former employee at local equipment maker Naura Technology told Reuters.
Market Reshuffle and Technical Milestones
The repercussions of this mandate are profound for the global semiconductor supply chain. The requirement is effectively squeezing out foreign competitors from the world's largest chip market. Companies like America's Lam Research and Japan's Tokyo Electron now face an increasingly uncertain future in China.
Conversely, the forced domestic partnership is accelerating the development of Chinese equipment firms. Companies such as Naura and AMEC are reportedly improving their technology through this guaranteed collaboration. The "Whole Nation" effort is also yielding technical breakthroughs, with Chinese scientists said to be prototyping indigenous machines capable of cutting-edge lithography, a critical step in making advanced chips.
This move underscores a deepening tech decoupling, positioning China's semiconductor ambition not just as an economic goal but as a strategic imperative for national security in the face of tightening Western sanctions.
