When most analysts discuss China’s semiconductor ambitions, they focus on SMIC’s wafer fabs or HiSilicon’s chip designs. Fewer look at the layer underneath: the machines that make chips possible. Semiconductor equipment — the etching systems, deposition tools, ion implanters, and metrology instruments that define what nodes a fab can manufacture — has long been the industry’s most protected moat. Applied Materials, ASML, Lam Research, KLA, and Tokyo Electron collectively control more than 80% of global semiconductor equipment revenue. China’s share of that market, until recently, was negligible.
That is changing. Over the past decade, three Chinese companies have emerged as serious domestic challengers: AMEC (Advanced Micro-Fabrication Equipment Inc., or 中微半导体), Naura Technology Group (北方华创), and SMEE (Shanghai Micro Electronics Equipment, or 上海微电子). Understanding what they can and cannot yet do is essential intelligence for anyone operating in the global semiconductor supply chain.
Why Semiconductor Equipment Matters More Than Fabs
A chip fab without access to the right equipment is useless. TSMC’s leadership at 3nm and 2nm depends entirely on ASML’s extreme ultraviolet (EUV) lithography machines — tools that cost roughly $380 million each and require components from more than 5,000 suppliers across 40 countries. When the US Commerce Department placed ASML’s EUV exports to China on the Entity List in 2019 and tightened controls further in 2022 and 2023, it effectively placed a ceiling on the process nodes Chinese fabs could reach without breakthrough domestic alternatives.
The US Bureau of Industry and Security (BIS) has framed these controls not as protectionism but as national security measures — restricting equipment capable of producing chips below 14nm to 16nm thresholds for a range of end uses. The practical result is that China’s most advanced domestic fab, SMIC, is producing 7nm-equivalent chips using deep ultraviolet (DUV) multi-patterning techniques — a slower, more expensive workaround that requires more processing steps but avoids the EUV dependency. For the full BIS framework on semiconductor controls, see the Export Administration Regulations published by the US Department of Commerce.
China’s response has been to pour investment into domestic equipment makers. The National Integrated Circuit Industry Investment Fund (the “Big Fund”), established in 2014 and recapitalized in 2019 and 2024 with cumulative commitments exceeding 300 billion RMB (roughly $42 billion at current rates), has directed substantial capital toward equipment, materials, and EDA software — the layers of the stack that remain most exposed to foreign control.
AMEC: China’s Most Credible Equipment Champion
AMEC was founded in 2004 in Shanghai by Gerald Yin Zhiyao, a veteran of Applied Materials with deep experience in dielectric etch systems. The company’s core product lines — etch equipment and MOCVD (metal-organic chemical vapor deposition) reactors for compound semiconductors — now serve leading fabs globally, including TSMC and Samsung in their less-advanced process lines.
AMEC’s dielectric etch systems have been qualified at major Asian fabs for 28nm and above. The company reports having over 1,200 systems deployed in customer fabs worldwide as of 2024. Revenue reached approximately 3.97 billion RMB ($550 million) in 2023, a 33% year-over-year increase, driven largely by domestic Chinese fab expansion as SMIC, Hua Hong Semiconductor, and CXMT invested aggressively in capacity.
Critically, AMEC has made inroads into conductor etch — a harder category than dielectric etch and one where Lam Research and Tokyo Electron dominate at advanced nodes. The company has disclosed conductor etch qualifications at sub-14nm nodes at unnamed customers, a milestone that, if verified at scale, would represent a genuine breakthrough rather than incremental progress.
AMEC’s MOCVD business is also notable. The company is the world’s largest MOCVD equipment maker by unit volume, with its Prismo series deployed in LED fabs across China and Southeast Asia. As compound semiconductors (GaN, SiC) become increasingly critical for EV power electronics and 5G RF — markets where China has strong downstream demand — AMEC’s equipment position gives it leverage in a supply chain segment that the US-China competition has not yet fully contested.
Naura Technology Group: The Broad Platform Play
Naura Technology Group (北方华创) is China’s most diversified semiconductor equipment maker, with product lines spanning thermal processing, CVD (chemical vapor deposition), PVD (physical vapor deposition), etch, and cleaning equipment. The company was formed through the 2016 merger of Beijing NMC (北京北方微电子) and Beijing Sevenstar Electronics (七星电子).
Naura’s 2023 revenue reached approximately 19.9 billion RMB ($2.76 billion), making it by far China’s largest semiconductor equipment company by revenue and one of the top 10 globally. The company serves every major domestic fab, including SMIC, YMTC (flash memory), CXMT (DRAM), and Hua Hong, and has begun qualifying equipment at leading-edge Korean and Taiwanese fabs for certain tool categories.
The company’s PVD and CVD equipment lines are considered among the most competitive China has produced, with performance parameters reportedly approaching those of Applied Materials tools at 28nm and above. Thermal processing — furnace equipment used for annealing, oxidation, and diffusion — is another area where Naura has achieved strong domestic market penetration, partly because this category has historically been less export-controlled and Naura had longer to develop commercial relationships.
Naura’s ambitions extend into atomic layer deposition (ALD), a critical tool for gate dielectric and high-k metal gate processes at sub-20nm nodes. ALD equipment from Applied Materials and ASM International commands premium pricing precisely because these steps are indispensable at leading-edge nodes. Naura has ALD tools in development and early qualification, with full commercial deployment expected in 2025 to 2026 — a timeline that aligns with domestic fab ramp schedules.
SMEE: The Lithography Problem
If there is one tool category where China’s domestic equipment industry faces its most daunting challenge, it is lithography. ASML’s EUV monopoly is the most discussed bottleneck, but even immersion DUV lithography — the technology used for 14nm to 28nm production — remains dominated by ASML, Nikon, and Canon.
SMEE (上海微电子装备) has been developing domestic lithography systems for over two decades. The company’s SSA/BSB series steppers have been deployed in packaging and back-end-of-line applications, as well as in less-advanced front-end processes. As of 2024, SMEE’s most advanced production stepper is reported to support 28nm patterning — a node that TSMC reached in 2011 but that represents the floor of commercially viable advanced logic manufacturing today.
The gap between SMEE’s current capability and ASML’s latest immersion DUV systems (which support 7nm equivalent with multi-patterning) is significant. Developing a competitive immersion lithography system requires not only optical design expertise but a mature supply chain for ultra-high-purity lens glass, specialized light sources, vibration isolation systems, and metrology integration — areas where Japan, Germany, and the Netherlands have dominant clusters. SMEE’s path to competitive immersion DUV is a multi-year project requiring continued state investment and talent development.
Despite this gap, SMEE’s 28nm stepper has real commercial value. China’s legacy chip market — microcontrollers, power devices, display drivers, analog ICs — operates largely at 28nm and above. As domestic fab capacity at these nodes expands, driven by government-backed players like CXMT and SMIC’s legacy lines, SMEE has a captive market that funds its R&D without requiring it to compete immediately at the leading edge.
The Supporting Ecosystem: Materials, EDA, and Talent
Equipment makers do not operate in isolation. China’s semiconductor equipment push is part of a broader effort to localize the full supply chain, including photoresist (where Shin-Etsu Chemical and JSR of Japan hold dominant positions), CMP slurry (dominated by Cabot Microelectronics and CMC Materials), and electronic design automation (EDA) software (controlled largely by Synopsys, Cadence, and Mentor Graphics, all US companies subject to BIS controls).
Domestic photoresist makers including Ruihong Microelectronics and Kempur Microelectronics have made progress in KrF resist (used at 350nm to 248nm) and are working toward ArF (193nm) qualifications. EDA localization is further behind; Beijing-based Empyrean Software (华大九天) and Guangzhou-based Xpeedic Technology have tools for specific design steps but do not yet offer full-flow alternatives to Synopsys or Cadence at advanced nodes.
Talent remains a structural constraint. China produces the world’s largest number of electrical engineering graduates annually, but deep process knowledge — the understanding of how equipment parameters interact with materials chemistry and device physics — is built over decades in fab environments. The loss of access to US, European, and Taiwanese industry veterans following export control tightening has slowed knowledge transfer. Some Chinese equipment makers have accelerated hiring of diaspora engineers from Taiwan, Korea, and the US, a trend that has generated legal scrutiny in multiple jurisdictions.
For a broader view of how China’s industrial policy shapes these dynamics, Made in China 2025 outlined the semiconductor equipment and materials sectors as priority targets — a framework whose goals remain very much in force despite the policy’s lower public profile after 2018. China’s Ministry of Industry and Information Technology (MIIT) publishes annual progress reports on semiconductor self-sufficiency goals at miit.gov.cn.
What This Means for Global Semiconductor Supply Chains
The strategic implications of China’s equipment push are asymmetric. In the near term — through roughly 2028 — Chinese fabs will remain dependent on foreign equipment for the most advanced process steps, and the US-led export control framework will continue to constrain progress at cutting-edge nodes. ASML’s EUV systems will not reach Chinese fabs absent a fundamental policy reversal that no current Western government is considering.
But in the medium term, the picture is more complex. China’s domestic equipment makers are credibly competitive at 28nm and above — nodes that account for the vast majority of global chip unit volume. As Chinese fabs expand capacity at mature nodes (driven by subsidized investment and captive demand from China’s massive consumer electronics, EV, and industrial automation sectors), the portion of global semiconductor manufacturing that does not require Western equipment increases.
For US and European equipment makers, this creates a shrinking addressable market in China — historically a growth engine. Applied Materials derived approximately 27% of its 2023 revenue from China ($6.6 billion of $26.5 billion total). Lam Research’s China exposure was even higher, at roughly 42% of net revenue in fiscal 2023. These figures have declined following export control implementation but remain material, and the trajectory toward further decline as domestic alternatives qualify at mature nodes represents a meaningful medium-term headwind.
For procurement officers and supply chain strategists at global manufacturers, the practical question is increasingly which chip categories remain dependent on Western-equipped fabs and which can be sourced from Chinese fabs with acceptable performance and reliability parameters. This calculation varies by product — automotive-grade chips require safety certifications that take years to establish with new suppliers — but it is a calculation that every serious procurement team should be modeling now.
For a deeper look at how China’s broader semiconductor design ecosystem is developing alongside equipment localization, see our coverage of HiSilicon, Unisoc, and Cambricon, and how SMIC is navigating the advanced node race under export controls. The equipment layer examined here is the upstream foundation on which both of those stories ultimately depend. China’s progress at that layer — slower than Beijing would like, faster than many Western analysts predicted — is one of the most consequential industrial storylines of the decade.