China's Semiconductor Equipment Localization Rate Triples to 23%, With Path to 39% by 2030
A new industry analysis reveals that China's domestic semiconductor equipment sector has reached a critical inflection point, with localization rates surging and the country's two largest memory chipmakers simultaneously launching major capacity expansion programs that are set to generate billions of dollars in equipment procurement demand.
According to a report published by Yole Group on June 25, 2026, titled Mainland of China Semiconductor Equipment Industry 2026, the French market research and strategic consulting firm's semiconductor equipment team — comprising analysts Merle Zhao, Paule Durin, Clara Grcevic, and Vishal Saroha — has conducted a comprehensive assessment of the competitive landscape, technological gaps, and market trajectory of China's domestic equipment industry.
Dual Expansion Triggers Multi-Billion Dollar Equipment Demand
In the second quarter of 2026, two of China's most strategically significant chipmakers moved in rare lockstep to scale up production capacity. Changxin Memory Technologies (CXMT), the country's leading DRAM supplier, launched a large-scale equipment procurement tender targeting an incremental annual wafer capacity of 50,000 to 60,000 wafers, with associated equipment purchasing needs estimated at 5 billion to 6 billion. Separately, Yangtze Memory Technologies (YMTC), China's dominant NAND Flash producer, initiated a tender on May 14 for the process equipment pipeline installation phase of its second-phase fab.
The simultaneous capacity push by both companies is directly driving procurement demand for core equipment categories including etching, thin-film deposition, and chemical mechanical planarization (CMP). Yole Group analyst Merle Zhao characterized the concurrent expansion as "not a coincidence," attributing it to the convergence of surging global AI compute demand and the strategic imperative to build supply chain resilience.
Localization Rate Triples in Four Years, But Gaps Remain Stark
Perhaps the most striking data point in the Yole Group analysis is the trajectory of China's overall semiconductor equipment localization rate: from approximately 8% in 2021 to 23.2% in 2025. The firm projects this figure will reach 39% by 2030 — a meaningful gain, though one that also underscores how dependent Chinese fabs will remain on foreign-sourced equipment for the foreseeable future.
The report characterizes domestic progress through a three-tier framework that reflects the uneven pace of substitution across equipment categories.
The first tier — described as "fast followers" — includes dry etching, thin-film deposition, CMP, and wafer thinning equipment. Domestic suppliers in these segments have demonstrated mass-delivery capability at mature process nodes and are transitioning from "functionally viable" to "performance competitive."
The second tier encompasses wet cleaning, metrology and inspection, ion implantation, and photoresist processing. These are areas where progress is underway but fragmented, with breakthroughs in select sub-segments yet to coalesce into comprehensive coverage.
Lithography equipment remains firmly in the third tier and constitutes the most formidable structural challenge for China's equipment ambitions. Constrained by limitations in critical components and supply chain depth, domestic lithography substitution is expected to remain a long-term project with no near-term resolution in sight.
Market Structure Reveals a Fundamental Asymmetry
Despite the acceleration in localization, the Yole Group analysis highlights a significant structural imbalance: while mainland China accounts for more than one-third of global semiconductor equipment demand — making it one of the world's most important equipment markets — Chinese domestic equipment vendors collectively capture only approximately 6% of global wafer fab equipment (WFE) revenue. This gap between consumption share and production share defines both the scale of the opportunity and the magnitude of the challenge facing domestic suppliers.
The report also situates this expansion cycle within China's broader industrial policy context. The conclusion of the 14th Five-Year Plan (2021–2025) has left a legacy of strategic investment that has contributed to a "3+2" geographic cluster structure: Beijing, Shanghai, and Shenzhen anchoring logic chip manufacturing, while Wuhan and Hefei serve as the primary hubs for memory chip production. Yole Group estimates that capital expenditure by domestic Chinese fabs reached approximately $5 billion in 2025, representing a compound annual growth rate of 24%.
From Policy-Driven to Performance-Driven
A central thesis of the Yole Group analysis is that China's equipment sector is undergoing a qualitative shift in its competitive basis — moving away from a model where procurement decisions were primarily shaped by government policy mandates and toward one where domestic equipment must win on technical merit. This transition, the analysts argue, is what will determine whether the projected gains through 2030 prove durable.
As CXMT and YMTC move from planning to active procurement, the degree to which domestic equipment vendors can capture orders in this expansion cycle will serve as a real-world stress test of that thesis. First-tier suppliers are positioned to benefit immediately; second-tier players face a medium-term window; and third-tier categories, particularly lithography, will continue to rely predominantly on imports — leaving a structural dependency that no near-term policy intervention is likely to resolve.
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