US-China tech war: China becomes world’s top semiconductor equipment market as Beijing pushes local chip industry

China vaulted to the No 1 spot for new semiconductor equipment for the first time in 2020, surpassing Taiwan, South Korea and Japan, as the nation’s chip makers rushed to build new capacity amid a tech war with the US, according to data from trade group SEMI.

Mainland China saw annual sales of equipment grow 39 per cent to US$18.72 billion last year, with Taiwan being the second-largest market with sales of US$17.15 billion. Taiwan’s growth was flat coming after a strong year in 2019, according to a report from SEMI, a US-based industry association that represents companies that supply equipment and materials to chip makers.

China’s emergence as the world’s top market for semiconductor manufacturing equipment, which includes wafer processing, assembly, packaging and testing, comes at a time when the nation is aggressively investing in new semiconductor plants and facilities as part of a long term goal of reducing its reliance on US-origin technology.

Separately, China’s customs authority has waived import duties for semiconductor equipment through to 2030. However, China is still banned from buying the most advanced equipment needed to produce chips at leading edge nodes, including extreme ultraviolet (EUV) lithography machines from Dutch company ASML.

ASML chief executive officer Peter Wennink said this week that export controls on China would not only fail to halt the country’s technological progress, but would also hurt the US economy.

“I believe that export controls are not the right way to manage your economic risks if you have determined that there is an economic risk,” Wennink said during an online industry event on Wednesday, adding that such a move would also “cost non-Chinese economies a lot of jobs and a lot of income”.

The pandemic has increased demand for consumer electronics products as millions of people around the world moved to remote working and online learning amid lockdowns and social-distancing measures, which in turn boosted demand for semiconductors.

Worldwide sales of semiconductor manufacturing equipment surged 19 per cent from US$59.8 billion in 2019 to a new all-time high of US$71.2 billion in 2020, the SEMI report said.

South Korea registered 61 per cent growth to US$16.08 billion, maintaining its third position, while Japan and Europe saw their spending on manufacturing equipment advance 21 per cent and 16 per cent respectively.