Against the backdrop of China’s self-reliance policy, massive investment in semiconductors is advancing through support from national funds and local governments. While localization is progressing rapidly in mass-production and standardized areas, the outlook indicates that Japan, Europe and the United States will retain their long-term technological lead in core areas such as EUV.
In recent years, China has combined national-level semiconductor funds with preferential measures from local governments, directing substantial funding toward fab construction, equipment purchases, and support for materials and equipment manufacturers. The total investment across Phases 1 through 3 amounts to approximately RMB 686.8 billion, with Phase 3 being particularly large. The funds are being allocated to localize equipment and materials and to invest in bottleneck areas, creating a framework that promotes both quantitative expansion and the long-term development of human resources and supply-chain capabilities.
The adoption rate of domestically produced equipment is increasing, particularly at newly built fabs, and local procurement is advancing in processes such as etching, deposition, CMP and wafer thinning. Meanwhile, Japan’s major foundry equipment market remains large, although China’s equipment spending is expected to slow from approximately USD 50 billion at its 2024 peak to approximately USD 38 billion in 2025. Japanese, European and US companies are expected to retain their lead in EUV-related fields.
Localization is progressing most rapidly in areas where mass-production capability and cost are the priorities, as well as in standardized materials and components. Although the localization rate was low as of 2021, it is expected to rise by 2025 and reach approximately 39% by 2030. Core technologies for lithography equipment and high-precision materials are highly challenging, and localization is expected to remain a long-term issue.
For Japanese materials and equipment manufacturers, a three-tier strategy is considered effective: in the short term, collaboration with customers and supply diversification; in the medium term, investment in differentiation and the provision of solutions; and in the long term, maintaining technological advantages through fundamental research and international joint research. Maintaining competitiveness in core areas will depend on strengthening reliability and long-term customer relationships.