Japan, Netherlands win as China's chip tool imports surge on US tensions
Shipments from Singapore, South Korea and Malaysia also rose in 2024
TAIPEI/SEOUL -- China bought a record amount of foreign chipmaking equipment in 2024 as part of efforts to massively expand domestic chip production as well as build up stockpiles of key tools amid rising tensions with the U.S.
Of the $30.9 billion imported from major sources, nearly $20 billion came from Japan and the Netherlands, Nikkei Asia found, with smaller sources like Malaysia and Singapore also rising sharply.
Japan remained China's top source of semiconductor manufacturing equipment last year, closely followed by the Netherlands, while Singapore and the U.S. came in third and fourth by origin, according to Nikkei Asia's analysis of Chinese customs data.
The $9.63 billion worth of equipment imported from Japan was a 28.23% year-on-year increase, marking the fifth record-breaking year in a row since U.S.-China tensions began rising in 2019. Japan has been China's leading foreign supplier since then, with annual procurement tripling between 2018 and 2024.
Imports from the Netherlands, meanwhile, surged 31.6% to $9.53 billion last year.
The sharp increase in imports from these two key sources of chip production tools was driven not only by China's broad push to localize tech production but also concerns over the Dutch and Japanese governments tightening export controls to align with U.S. restrictions.
China's imports of chip tools from the U.S., meanwhile, grew just 11.5% last year to $3.18 billion. That fell short of its record U.S. imports of $3.69 billion in 2021.
Nikkei Asia's analysis also found that Singapore surpassed the U.S. to become the third-largest source of China's semiconductor equipment imports, reaching $4.86 billion last year -- a 345% surge compared to 2018.
Imports from Malaysia also rose as many U.S. chip equipment makers such as Applied Materials and Lam Research expanded production footprints in Southeast Asian markets, helping them become critical chip tool exporters. Imports from South Korea increased more than 310% from 2018 to $1.61 billion in 2024, according to Chinese customs data. South Korean chip tool makers were previously considered relatively second-tier players, but they are gaining traction in memory chips and chip packaging.
China's domestic chip equipment sector has grown alongside its imports, with the top five domestic players all reporting record-high revenue last year, according to Nikkei Asia's analysis. Four of them also delivered their highest-ever net profits last year. Naura Technology, for example, saw its net profit surge more than 44% and its revenue climb 35%. It broke into the global top six of equipment makers by revenue in 2024, a space that has always been dominated by U.S., European and Japanese players.
China launched a "de-Americanization" campaign to encourage local chipmakers to replace U.S. chip tools if at all possible to reduce geopolitical risks, industry executives told Nikkei Asia.
Chip equipment from Japan and South Korea is in particular demand as Chinese chipmakers expand in both chip manufacturing and chip packaging to meet surging local demand, according to multiple executives at equipment makers.
"Lithography and cleaning machines from Japan and hybrid bonding tools from South Korea are in high demand," an executive with a Chinese chip tool maker told Nikkei Asia.
For example, hybrid bonding tools from Hanmi Semiconductor of South Korea are used by SK Hynix to develop high-bandwidth memory chips, essential components for AI chips, the executive added. "Every tool that SK Hynix uses for HBMs, Chinese companies want them, too."
South Korea's exports of semiconductor manufacturing tools to China jumped 42.4% to $1.4 billion in 2024 from the previous year, according to data from the Korea International Trade Association, driven by demand from Chinese chipmakers, including the country's leading memory chipmaker ChangXin Memory Technologies.
"About half of the exports go to Chinese makers, including CXMT, while the other half is for Samsung's Xian and SK Hynix's Wuxi factories," said Kim Hyok-jung, a researcher at Korea Institute for International Economic Policy. "Chinese chipmakers increased their investment in tools with government support."
Japan and the Netherlands, longtime leaders in high-quality semiconductor manufacturing equipment, are home to major players such as Tokyo Electron, Advantest and ASML.
ASML said it expects its China sales to slow and normalize in 2025 compared to 2024 due to export controls.
U.S. players include Applied Materials, Lam Research and KLA, while notable South Korean makers include Semes and Hanmi Semiconductor.
An executive with a Japanese chip production tool maker said demand is surging because the technologies of Japanese and South Korean suppliers are extremely appealing to Chinese chipmakers looking to elevate their capabilities but struggle to access American tools.
"We've also noticed increasing talent outflows from Japanese and South Korean suppliers to China, including retired senior engineers," the executive said. "In the longer term, three to five years, Chinese homegrown tool suppliers' technological breakthroughs will meaningfully affect foreign suppliers' market share and cause greater pressure."
While business boomed last year, Japanese and Dutch equipment suppliers are walking a tightrope between the U.S. and China. Washington introduced export controls on chip production tools against China in late 2022 and it has been pressuring Japan and the Netherlands to roll out similar restrictions to curb China's advancement in semiconductor manufacturing.
Spending on semiconductor equipment is a key indicator of chip plant expansion, as equipment accounts for the largest portion of chipmakers' total capital expenditure. China's share of the mature chip market is projected to rise from 28% in 2025 to 39% by 2027, intensifying pressure on global competitors, Nikkei earlier reported. Leading Chinese chipmaker SMIC said it will maintain near-record capital spending in 2025 to expand its market share and meet rising domestic demand for chip production.
David Dai, a semiconductor analyst at Bernstein Research, said China's spending on semiconductor equipment has risen significantly in recent years not only for stockpiling but also to support a massive expansion in local production. Total procurement, including smaller import sources and local producers, came to $45 billion, compared to $12 billion in 2019, according to Bernstein.
Most of the benefit, however, is going to domestic players.
"China's domestic semiconductor equipment sector is gaining market share as local companies begin to replace some U.S. rivals," Dai said. "It's increasingly clear that U.S. chip equipment makers in areas like etching, deposition, and cleaning are losing ground to Chinese homegrown competitors amid rising geopolitical tensions and export controls. Equipment makers from Japan, the Netherlands, and South Korea have all benefited from China's surge in spending, with the Netherlands, in particular, seeing a notable uptick in stockpiling due to tightening export controls."