China Mandates 50% Domestic Equipment Rule For Chipmakers

China is quietly mandating that chipmakers use at least 50% domestically made equipment when expanding capacity, "as Beijing pushes to build a self-sufficient semiconductor supply chain," according to Reuters. From the report: The rule is not publicly documented, but chipmakers seeking state approval to build or expand their plants have been told by authorities in recent months that they must prove through procurement tenders that at least half their equipment will be Chinese-made, the people told Reuters. The mandate is one of the most significant measures Beijing has introduced to wean itself off reliance on foreign technology, a push that gathered pace after the U.S. tightened technology export restrictions in 2023, banning sales of advanced AI chips and semiconductor equipment to China. While those U.S. export restrictions blocked the sale of some of the most advanced tools, the 50% rule is leading Chinese manufacturers to choose domestic suppliers even in areas where foreign equipment from the U.S., Japan, South Korea and Europe remain available. Applications failing the threshold are typically rejected, though authorities grant flexibility depending on supply constraints, the people said. The requirements are relaxed for advanced chip production lines, where domestically developed equipment is not yet fully available. "Authorities prefer if it is much higher than 50%," one source told Reuters. "Eventually they are aiming for the plants to use 100% domestic equipment."

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