Despite technological restrictions from the US and its allies, SMIC and Hua Hong Semiconductor remain dedicated to investment and continue to expand their production capacity, highlighting China's resilience and adaptivity.
A recent TechInsights report indicates that after several years of growth, China's demand for chip manufacturing equipment is projected to decline in 2025. This decrease, driven by overcapacity and US sanctions, will see a drop in spending on wafer manufacturing equipment, the first since 2021.
According to TechInsights, China has led the world in producing wafer fabrication equipment, making up nearly 40% of the market, with expenditures of US$41 billion over the past two years. However, due to export controls and domestic overcapacity, spending in China is expected to decline to US$38 billion in 2025, decreasing its market share to 20%, with an annual drop of about 6%.
Overall, SEMI forecasts strong growth in the global semiconductor equipment market, driven by AI advancements and investments in mature process technologies. From 2025 to 2027, spending on 12-inch wafer fabrication equipment worldwide is projected to hit a record US$400 billion.
SMIC and Hua Hong investment plans
SMIC, China's leading foundry, continues to expand its capacity. Co-CEO Haijun Zhao recently announced that despite facing equipment bans from the US and the Netherlands, SMIC plans to spend around US$7.5 billion on capex in 2025, with the goal of adding one fab per year, producing about 50,000 12-inch wafers annually.
SMIC, which generates 89% of its total revenue from China, is optimistic about China's automotive chip market and has set up a fab dedicated to producing these chips. The company is currently certifying automotive and industrial-grade products. In the fourth quarter of 2024, automotive chips are projected to make up 8% to 10% of SMIC's revenue and stabilize at around 10% as they collaborate with more vehicle manufacturers, meeting one-third of local demand.
Supported by the Chinese government's stimulus program, SMIC anticipates a 20% to 25% growth in orders, particularly driven by large-screen television and the 8-inch wafer demands. The company expects to outperform its peers in the same market segments in 2025, benefiting from industry chain transformations and policy advantages.
On another note, Hua Hong Semiconductor is expanding its capacity, with newly-appointed president Peng Bai announcing a shift from mature processes like 65nm and 55nm to 28nm processes. The company plans to advance these processes to 28nm and 22nm in the coming years to meet market demands.
Hua Hong Semiconductor is expanding its Wuxi production lines to reach a monthly capacity of 20,000 12-inch wafers by 2025.
