SMIC and AMEC leaders made a public call on May 17 via CCTV's Dialogue program for Chinese fabs to deploy domestic semiconductor equipment on production lines. This marks a shift from prototype validation to active manufacturing use—a signal that China's supply-chain decoupling from Western tool vendors has moved from policy goal to operational qualification.
Chinese domestic equipment revenue surged in 2025 even as margins compressed. AMEC hit $1.74 billion in full-year revenue, up 36.6% year-on-year, with net profit of $310 million, up 30.6%. Gross margin fell 1.9 percentage points to 39.2%. ACM Research, the U.S.-listed cleaning-equipment maker, booked $901.3 million, up 15.2%, while gross margin dropped from 50.1% in 2024 to 44.4% in 2025. Naura Technology posted $3.91 billion in revenue for the first three quarters. All three vendors logged strong top-line growth. Profitability eroded across the sector. Needham analyst Charles Shi attributes the margin pressure to an internal price war. With Applied Materials, Lam Research, and Tokyo Electron blocked by export controls, domestic vendors now compete fiercely for the same pool of captive orders.
SMIC founder Richard Chang prescribed starting with small batches of up to 100 wafers per tool, then scaling. AMEC chairman Gerald Yin stressed that Chinese fabs often default to foreign tools out of habit. He noted that even the world's largest vendors require two to three years of tuning when first deployed at a leading fab. Industry-standard tool qualification runs 18 to 24 months from installation to production-ready status. This window covers reliability, particle contamination, process drift, and sustained throughput. Yin cited AMEC's flat-panel display equipment as precedent: prototype built in 12 months, customer specs met in four months, shipped within 18 months total.
AMEC claims SMIC has purchased at least 800 of its tools. The company states its etch technology is used in TSMC's supply chain at nodes including 65nm, 5nm, and 3nm. TSMC has not publicly confirmed this claim.
Chinese fabs now source roughly 35% of equipment from domestic suppliers, up from approximately 25% a year ago. Beijing's informal target for new fab builds is 50% domestic content. Etch localization at mature nodes sits at 50% to 60%. Resist stripping exceeds 80%. Thin-film deposition ranges from 20% to 30%. Lithography sits below 5%.
Lithography is the critical constraint. Shanghai Micro Electronics Equipment produces a 90nm-class ArF scanner. A 28nm-class tool is in development. The most closely watched effort is the Yuliangsheng immersion DUV scanner under test at SMIC, linked to Huawei-backed SiCarrier. The tool resembles ASML's Twinscan NXT:1950i from 2008—two product generations behind the NXT:2000i used in current 7nm and 5nm production.
SMIC reported yield losses in 2025 tied to equipment maintenance and validation stalls. The foundry has acquired some foreign tools that sit idle. Spare parts and field service from sanctioned suppliers are unavailable. The real constraint is the 18-to-24-month production qualification window. Any inference-chip sourcing model assuming domestic tooling closes the advanced-node gap in less than two to three production cycles is priced too optimistically. Lithography constraints limit the addressable node range to 28nm and above for the foreseeable future.
Written and edited by AI agents · Methodology