China's top economic planner pledged to drive decisive breakthroughs in integrated circuit core technologies across the full supply chain, a commitment that could accelerate domestic equipment substitution and reshape global semiconductor competition.
China's top economic planner pledged to break through integrated circuit core technologies across the full supply chain, a policy push that could accelerate domestic equipment substitution and reshape the competitive balance in global semiconductors.
"We will harness the nationwide system advantage to drive decisive breakthroughs in integrated circuit core technologies across the full chain and promote high-quality development of the integrated circuit industry," the National Development and Reform Commission said in a statement, citing four industry highlights: key technology breakthroughs, stronger enterprise competitiveness, high capacity utilization and improved supply chain security.
The announcement aligns with the 15th Five-Year Plan (2026-2030), which places scientific and technological self-reliance at the center of China's industrial strategy. Beijing plans to cultivate about 1,000 pilot companies and 100 pilot complexes in emerging industries by 2035, with integrated circuits, aerospace, biopharmaceuticals and smart robotics designated as priority sectors. The push comes as China's integrated circuit industry profits surged 18.5-fold year-on-year in the first seven months of 2026, according to National Bureau of Statistics data, with computing chips and high-bandwidth memory among the main drivers.
The stakes extend well beyond China's borders. Beijing has directed semiconductor manufacturers to source at least 50 percent of new equipment from domestic suppliers, a mandate that pressures the $4.2 billion in annual China revenue generated by Applied Materials and the installed base of ASML's lithography systems. Goldman Sachs forecasts China's semiconductor capital spending will reach $82 billion by 2030, up 79 percent from its prior-year projection, while China's chip self-sufficiency rate hit roughly 70 percent in June, compared with 38 percent in January 2010.
Domestic Equipment Makers Capture Share as Mandates Bite
China's domestic semiconductor equipment industry has grown from a collection of small development programs into a credible alternative to Western suppliers. Combined sales from six major Chinese equipment makers — including Naura Technology, AMEC, Piotech and Hwatsing Technology — increased from $748 million in 2020 to $7.608 billion in 2025, more than a tenfold rise in five years. Their adjusted worldwide wafer-fabrication-equipment share climbed from 1.2 percent to 6.5 percent over the same period.
The 50 percent domestic-equipment requirement gives these suppliers a protected qualification environment at Chinese fabs, while U.S. export controls limit the foreign competition they face at advanced facilities. Shanghai Aishengna Electronic Technology Group has begun producing immersion deep-ultraviolet lithography systems, targeting approximately five units in 2026 and 20 in 2027, with initial deliveries planned for SMIC, Hua Hong and CXMT. By comparison, ASML shipped 131 immersion DUV systems in 2025.
CXMT Shows How Far Localization Has Progressed
CXMT, now the world's fourth-largest DRAM producer behind SK hynix, Samsung Electronics and Micron Technology, demonstrates how quickly the equipment supply chain is maturing. Industry trackers estimate domestic equipment now accounts for roughly 40 to 50 percent of tools installed on CXMT's production lines, with domestic penetration exceeding 60 percent in core etch processes at some facilities. The company's capacity reached approximately 290,000 wafer starts per month in Q1 2026 and could approach 350,000 by year-end, with new fabs in Shanghai and Hefei potentially lifting capacity above 600,000 wafers per month by 2030.
Applied Materials generated $2.095 billion from China in fiscal Q1 2026, representing 29.9 percent of total revenue, and $2.087 billion in fiscal Q2, or 26.4 percent of the quarter's total. The company has guided to roughly a $600 million revenue headwind in fiscal 2026 from expanded U.S. export restrictions. The NDRC's pledge to push decisive breakthroughs in core technologies suggests the substitution trend will only accelerate.
For investors, the NDRC announcement reinforces a structural shift already visible in the data. Chinese equipment suppliers are not just gaining share in restricted advanced fabs — they are increasingly displacing foreign tools in mature-node and specialty markets where Western companies can still legally sell. Applied Materials' AI-driven growth opportunities in advanced logic, gate-all-around transistors and HBM remain intact outside China, but the country's fastest-growing advanced fab is becoming a protected qualification market for domestic processing equipment. ASML faces a more direct threat from Aishengna's DUV program, though five planned systems in 2026 represent a qualification fleet rather than volume production.
This article is for informational purposes only and does not constitute investment advice.
