China is increasing its position in the semiconductor sector with a rule that requires chip manufacturers to purchase at least half of their production equipment locally.
According to Reuters, China is requiring chip manufacturers to purchase at least half of their production equipment locally. The measure reportedly took effect earlier this year and applies to companies wishing to build new chip factories or expand existing facilities. In their permit application, they must be able to demonstrate that at least 50 percent of the equipment used is from their own country.
Response to US sanctions
The Chinese semiconductor industry has long been heavily dependent on foreign chips and production machines. US export restrictions on advanced chips and lithography systems have put pressure on that model. For example, Nvidia was no longer allowed to sell H200 and H20 accelerators to China, but that ban was later lifted. The H200 can now be re-exported to China for a fee.
According to Reuters, applications that do not meet the 50% threshold are usually rejected. Authorities sometimes show flexibility only in the most advanced production lines, because suitable Chinese alternatives are still lacking. Foreign equipment must be completely phased out after a certain period.
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