China Chip Equipment Self-Sufficiency Reaches 21%：An Analysis of Competitive Dynamics
China's wafer fabrication equipment (WFE) market achieved 21% self-sufficiency in 2025, up from 16% in 2024, according to Bernstein's latest competitive dynamics analysis. This represents the fastest localization acceleration in the sector's history, with domestic equipment vendors reaching 10.5billioninrevenuewithinChina′s10.5 billion in revenue within China's 10.5billioninrevenuewithinChina′s50 billion total addressable market.
Key Market Developments in 2025
Overall Market Growth and Localization Trends
China's WFE demand reached 50billionin2025,accountingfor4150 billion in 2025, accounting for 41% of global demand of 50billionin2025,accountingfor41122 billion. Despite expectations of normalization, domestic substitution accelerated across multiple equipment segments, driven by what Bernstein characterizes as "genuine technological and commercial breakthroughs" rather than merely pull-forward demand.
The 21% self-sufficiency figure masks significant variation across equipment categories. Bernstein's analysis divides the market into three types:
- Type A segments (Dry Etch, Deposition): Large markets with substantial Chinese progress
- Type B segments (Lithography, Process Control, Doping): High-barrier segments with historically low domestic penetration
- Type C segments (Cleaning, Thermal Processing, CMP): Smaller segments with relatively high Chinese market share
Segment-Specific Performance Analysis
Dry Etch Equipment: Chinese vendors achieved 31% self-sufficiency, supported by 37% year-over-year growth. AMEC and NAURA maintain roughly equal market share at 47% and 48% respectively of the domestic segment. The companies have built complementary strengths — AMEC in capacitively coupled plasma (CCP) and NAURA in inductively coupled plasma (ICP) technologies.
Deposition Equipment: Local suppliers reached 27% self-sufficiency with exceptional 67% YoY growth. NAURA dominates physical vapor deposition (PVD) with a near-monopoly position, while expanding in chemical vapor deposition (CVD) segments. Piotech leads in plasma-enhanced CVD (PECVD) and is growing rapidly in atomic layer deposition (ALD).
Process Control Equipment: Despite being the highest-barrier segment, Chinese vendors achieved 63% YoY growth, reaching 10% self-sufficiency for the first time. Skyverse leads in unpatterned wafer inspection, while multiple startups focus on different sub-segments of this fragmented market.
Lithography Equipment: Remains the most challenging bottleneck with virtually zero progress in domestic substitution. SMEE (private company) remains the only player with commercially available equipment, primarily in back-end applications.
Global Vendor Performance in China Market
The performance of global equipment suppliers in China revealed stark differences in 2025, reflecting varying degrees of competitive pressure and market positioning.
Winners and Losers Among Global Players
Strong Performance:
- Lam Research (LRCX): +36% YoY growth, expanding dry etch market share to 28% from 22% in 2024
- Tokyo Electron (TEL): Maintained strong position despite some segments under pressure
Declining Performance:
- Applied Materials (AMAT): -12% YoY decline in China revenue
- Tokyo Electron in specific segments: -20% YoY in segments facing direct Chinese competition
- ASML and KLA: Both experienced high-single-digit declines after years of strong growth
The divergent performance reflects strategic positioning relative to Chinese competitors and export control policies. LRCX benefits from dry etch tools largely not being subject to export restrictions, while AMAT faces direct competition from Chinese vendors in deposition equipment.
Competitive Landscape by Major Players
Chinese Market Leaders
NAURA Technology Group: The domestic leader with the broadest product portfolio spanning deposition (PVD, CVD), dry etch (ICP), thermal processes, and cleaning equipment. The company expanded its deposition market share from 64% to 65% of the domestic segment in 2025, while entering doping equipment for the first time with 27% domestic market share.
Advanced Micro-Fabrication Equipment (AMEC): Primarily focused on dry etch with established strength in CCP technology and expanding ICP capabilities. The company is rapidly developing deposition equipment (ALD, LPCVD) and increased its domestic deposition market share from 1% to 3% in 2025.
Piotech: Specializes in deposition equipment with particular strength in PECVD and growing ALD revenue. The company experienced slight market share dilution due to revenue recognition delays but maintains strong technical competency and deep relationships with leading fabs.
Market Share Evolution
The domestic competitive landscape shows increasing consolidation among leading players while maintaining technological differentiation. In dry etch, AMEC and NAURA have built complementary technology portfolios that minimize direct overlap while providing customers with domestic alternatives to global suppliers.
Investment Implications and Future Outlook
Sector-Specific Investment Themes
Bernstein maintains Outperform ratings on NAURA, AMEC, and Piotech based on the accelerating localization trend in large Total Addressable Market (TAM) segments. The firm projects domestic vendors will expand market share from 21% in 2025 to approximately 43% by 2028, implying a ~35% CAGR for Chinese semiconductor equipment companies between 2024 and 2028.
The investment thesis centers on three key drivers:
- Irreversible Localization Trend: Domestic fabs increasingly prioritize supply chain resilience through co-development with local suppliers
- Technology Gap Closure: Many mature node domestic equipment offerings have achieved performance parity with global alternatives
- Government Support: Continued subsidies incentivize fabs to adopt higher localization ratios
Memory and Logic Capacity Expansion
Local memory customers have significantly revised upward their capacity expansion plans for 2026-2028 due to the emerging memory supercycle. Additionally, advanced logic capacity expansion is expected to accelerate given surging demand for domestic AI chips, providing a favorable backdrop for equipment suppliers.
Risks and Challenges
The primary risk factors include potential technology sanctions expansion, competitive response from global vendors, and the challenge of scaling advanced node capabilities. However, Bernstein notes that the 2025 progress represents genuine technological breakthroughs rather than merely policy-driven market share gains.
Global Semiconductor Equipment Market Context
China's equipment localization occurs within a broader context of global semiconductor supply chain restructuring. The $122 billion global WFE market is experiencing divergent regional growth patterns, with China's 41% share of global demand representing both an opportunity and strategic challenge for global suppliers.
The analysis indicates that global vendors' exposure to China will likely normalize as non-China demand grows faster, while Chinese players could accelerate share gains as pull-forward effects from global players diminish. This suggests a structural shift in the global competitive landscape rather than a temporary geopolitical adjustment.
For global semiconductor companies and investors, the 2025 data points to an inflection point where Chinese equipment suppliers transition from domestic challengers to global competitors capable of competing on technology and cost across multiple equipment segments.
The implications extend beyond equipment suppliers to the broader semiconductor ecosystem, as domestic equipment capabilities enable greater Chinese semiconductor manufacturing independence and potentially alter global technology transfer dynamics in advanced manufacturing processes.
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