China is accelerating its push for semiconductor independence, directing domestic chipmakers to source over 70% of their silicon wafers locally by the end of the year.
Back
Back
China Targets 70% Silicon Wafer Self-Sufficiency by Year-End
(P1) China has directed its domestic chipmakers to source more than 70% of their silicon wafers from local suppliers by the end of this year, an aggressive push for self-sufficiency that threatens to displace global market leaders and deepen the divide in the global technology supply chain.
(P2) "The Chinese government’s goal has effectively become an unwritten rule for domestic chipmakers to prioritize locally produced 12-inch wafers," sources familiar with the matter told Nikkei Asia.
(P3) The directive is one of China's most forceful yet to localize a critical segment of its semiconductor industry. While Beijing has set ambitious self-sufficiency goals before, industry participants believe this target is likely to be met. The focus on 12-inch wafers is particularly significant as they are the standard for advanced and mature chip production, forming the bedrock of everything from electric vehicles to data centers.
(P4) The policy stands to directly benefit Chinese wafer manufacturers such as National Silicon Industry Group (NSIG) and TCL Zhonghuan Renewable Energy Technology. Conversely, it poses a significant threat to international suppliers who have long dominated the Chinese market, including Japan's Shin-Etsu Chemical and SUMCO, Germany's Siltronic, and Taiwan's GlobalWafers. For these firms, the mandate could wall off a substantial portion of their addressable market.
A Response to Mounting Tech Pressure
Beijing's localization drive is not happening in a vacuum. It is a direct strategic response to escalating technology-related sanctions and restrictions from the United States and its allies. Washington has been working to limit China's access to advanced chipmaking technology, and just this week, the U.S. Federal Communications Commission (FCC) banned Chinese labs from its equipment certification program, further restricting market access.
This "unwritten rule" on wafer sourcing is a clear attempt to de-risk the foundational layer of China's vast electronics manufacturing ecosystem from foreign sanctions. By ensuring a domestic supply of the raw substrate for chips, China aims to build a more resilient supply chain, even if it means relying on more mature process nodes in the short term.
Reshaping the Global Supply Chain
The implications for the global semiconductor industry are profound. A successful 70% localization rate would significantly reduce China's reliance on imported wafers, which totaled over $3 billion in 2023. This shift could lead to a glut in the global market for certain types of wafers as established players lose their largest customer.
For investors, the directive creates a clear set of winners and losers. Chinese material suppliers are poised for a surge in orders and market share. International incumbents, however, face the dual challenge of a shrinking Chinese market and increased competition from state-supported Chinese rivals in other markets. This accelerates the trend of "friend-shoring" and the bifurcation of technology into separate, competing ecosystems—one aligned with China and one with the U.S.
This article is for informational purposes only and does not constitute investment advice.
[1] CN Targets 70% Domestic Advanced Silicon Wafer Usage by End-2026: Wire[2] FCC bans Chinese labs from US electronics certification[3] CN Targets 70% Domestic Advanced Silicon Wafer Usage by End-2026: Wire - AASTOCKS.com[4] As Nvidia goes to zero in China, Beijing races to fill the void - digitimes[5] Exclusive: China targets 70% advanced domestic silicon wafer use by 2026 - Nikkei Asia
