According to the latest data from the China Semiconductor Industry Association, the localization rate of domestic semiconductor equipment has risen from 25% in 2025 to 35%, exceeding the previous forecast of 30%. Based on the S-shaped growth curve (0–10% for the introduction phase, 10–40% for the acceleration phase, and 40–80% for the maturity phase), equipment localization has entered the core climbing period of the acceleration phase. Going forward, the growth rate will be significantly faster than that of both the introduction phase and the early stage of the acceleration phase. A detailed analysis of the semiconductor equipment localization rate entering a high-speed acceleration phase is presented below from the following perspectives.

I. China’s Semiconductor Equipment Industry Enters a Stage of Sustainable Development

After years of development, China’s semiconductor industry has gradually formed a positive cycle, transitioning from the investment phase to the harvest phase. As an upstream segment of the industry and a downstream recipient of capital transmission, the semiconductor equipment sector’s entry into the profitability stage indicates that the entire semiconductor industry has stepped into a phase of sustainable development, no longer driven merely by capital investment. At present, the revenue of China’s equipment enterprises is increasing year by year, and their profitability is also on a steady rise. NAURA has achieved consecutive net profit growth for 8 years, ACM Research for 7 years, and Naura Microelectronics for 4 years. Without their extraordinary R&D investments, other leading enterprises would have shown similar profit trends. With the improvement of China’s semiconductor manufacturing and design capabilities, domestic chips have gained recognition in both domestic and international markets, providing a broad market for China’s semiconductor equipment. Driven by technological progress, the revenue and profits of equipment enterprises have grown in tandem, bringing the entire industry into a virtuous cycle of investment and output, which will naturally sustain the industry’s rapid development.

II. The Semiconductor Industry Ecosystem Has Improved Significantly

Notable enhancements have been made in terms of enterprises’ R&D investment intensity, the professionalism of technology finance, and collaboration across the industrial chain.First, China’s semiconductor equipment enterprises have maintained active R&D investment for years. The top five domestic semiconductor equipment enterprises by market capitalization have seen continuous growth in R&D investment for many consecutive years—a growth streak even longer than that of their revenue and profits. In particular, in 2024, AMEC allocated nearly one-third of its revenue to R&D, representing a 90% year-on-year increase. Sustained R&D investment has naturally accelerated the accumulation of technological reserves.

Second, technology finance has become increasingly specialized, with industrial capital willing to invest in cutting-edge, challenging, and bottleneck segments. A key factor behind this is the remarkable success of national financial policy tools. A large number of semiconductor innovation enterprises, including many semiconductor equipment manufacturers, have been listed on the STAR Market despite operating at a loss, raising substantial capital. Fueled by this valuable funding, many innovative enterprises have gradually turned profitable, contributing to the current bull market in technology and validating the effectiveness of the STAR Market system. The success of the STAR Market and ChiNext has opened up channels for investment in technological innovation, attracting significant capital flows to outstanding innovative enterprises.

Finally, some outstanding equipment enterprises have secured access to production line validation. Given the extremely high threshold for equipment validation in Fab production lines, only a select few elite equipment enterprises can convince Fabs to adopt domestic equipment through their own technological strength. Once equipment is put into actual production line operation, it will rapidly drive the growth of domestic semiconductor equipment.

III. China’s Semiconductor Equipment Enterprises Present a Fiercely Competitive Landscape

Beyond leading enterprises, a large number of emerging players have emerged, with multiple parallel R&D efforts advancing key projects simultaneously. The industry as a whole demonstrates a multi-pronged approach to tackling core challenges. The localization of semiconductor equipment is a grand and arduous task, which requires leading enterprises to act as the main force, while emerging enterprises pursue differentiated strategies to add an extra layer of assurance to equipment localization. Furthermore, equipment localization is essentially a market-driven endeavor that necessitates full-fledged market competition—only a thriving industry can effectively address equipment-related challenges. Fierce competition is a defining feature of China’s market, especially in the technology race. Although this places tremendous pressure on enterprises, it objectively accelerates the progress of domestic equipment development and enhances the fault tolerance rate of equipment localization. Take thin film deposition equipment, which boasts the largest market demand: not only are leading enterprises making breakthroughs in this field, but emerging players have also achieved impressive results.

IV. Era-defining Opportunities Brought by AI

AI is the perfect gift bestowed upon China’s semiconductor industry at the most opportune moment. The impact of AI on China’s semiconductor sector can be summarized in three aspects:First, the democratization effect of new technologies. It is extremely difficult to challenge the dominance of international giants in traditional fields, but the rise of artificial intelligence has prevented these giants from widening the gap with Chinese enterprises, thereby enabling the entire Chinese semiconductor industry chain to benefit from the AI dividend.

Second, AI has significantly boosted market demand for chips. AI computing power itself generates enormous demand, creating a host of new market needs. Additionally, driven by the AI wave, emerging industries such as consumer electronics, the Internet of Things, and automotive electronics are experiencing rapid development, fueling the rapid expansion of the semiconductor industry scale.

Third, AI technology itself is driving technological iteration across all links of the chip industry, with AI improving industrial efficiency in everything from manufacturing processes to R&D activities.

Combined, these factors have provided a powerful impetus to China’s semiconductor equipment industry. According to SEMI statistics, global semiconductor sales grew by 19% to $628 billion in 2024, surpassing the $600 billion mark for the first time. Double-digit growth is expected to continue in 2025, with sales projected to exceed $1 trillion by 2030. As AI application terminals evolve, there are growing demands for semiconductor equipment performance and 3D integration technology. AI is driving extraordinary growth in semiconductor demand. Not long ago, Huawei publicly announced its plan to launch three major chip series within three years, which will require the construction of massive new production capacity. The next decade will be a golden opportunity period for the semiconductor supply chain, ushering in tremendous growth prospects for domestic equipment manufacturers. According to ChipInsights, the surging demand for domestic AI chips has propelled leading domestic high-end memory chip equipment suppliers into frontline Fabs.

V. Abundant Momentum for Equipment Localization

First, China boasts a large talent pool, even though there remains a shortage of high-end professionals. With a substantial talent base and a large number of returnee talents, China has assembled the world’s largest contingent of semiconductor equipment professionals. Currently, China’s semiconductor equipment industry offers the most opportunities for industrial practice and training. These talents have ample room for growth, and in time, China’s semiconductor equipment talent pool will evolve from being "the largest" to "the strongest".

Second, China has abundant industrial capital. While many enterprises are currently facing financing difficulties, the country’s industrial capital pool remains robust. In the past, major projects relied heavily on central government funding. Today, however, the availability of social capital has improved dramatically. Although major projects still require central government leadership, central government funds can leverage a significant amount of social capital. Data disclosed by Huaxin Investment, the sole manager of the National Integrated Circuit Industry Investment Fund (the "Big Fund"), shows that the first phase of the Big Fund leveraged social capital at a ratio of approximately 1:3.7. This indicates that social capital has both the enthusiasm and the capacity to invest in the semiconductor industry.

Third, local governments possess strong momentum for development. In recent years, local governments have continued to invest in the semiconductor equipment industry. Compared with semiconductor manufacturing and design, the equipment sector places higher demands on mechanical manufacturing capabilities, allowing more regions to enter the semiconductor industry by focusing on equipment manufacturing as their entry point.

Conclusion

The localization of China’s semiconductor equipment is underpinned by strong industrial logic, as well as ample talent, capital, market opportunities, and a strong national will to succeed. After years of development, the layout of the semiconductor industry has been completed, and outstanding enterprises have gained market recognition, bringing the entire industry into a positive cycle. Therefore, when industrial opportunities arise, the semiconductor equipment industry is bound to enter an acceleration phase. With this growth trajectory, the great cause of localizing China’s semiconductor equipment will surely be accomplished at an accelerated pace.