SMIC, AMEC CEOs Urge Domestic Chip Tool Tests on Production Lines

Chinese semiconductor manufacturers face mounting pressure to integrate domestically produced chipmaking equipment into active production lines, according to calls from industry leaders. SMIC founder Zhang Wei and AMEC CEO Liang Jun have urged foundries to accelerate testing of local tools, citing strategic and economic imperatives. The push comes as domestic equipment suppliers report record revenue but declining profit margins, signaling both progress and persistent challenges in the sector.

Pressure to Adopt Domestic Tools

Industry insiders note that while Chinese fabs have long relied on imported machinery, recent geopolitical tensions have intensified demands for self-sufficiency. Zhang and Liang emphasized that testing local tools on operational lines is critical for identifying gaps and refining reliability. “This isn’t just about reducing costs,” one executive said. “It’s about building trust in our own capabilities.”

AMEC, a major player in semiconductor equipment, saw revenue rise 22% year-over-year in the latest quarter, driven by increased orders for lithography and deposition systems. However, its net margin shrank to 14% from 18% in the same period last year, reflecting higher R&D and production costs. Similar trends are emerging across the sector, with companies struggling to balance investment in innovation with financial sustainability.

Some analysts argue that the push for local tools may expose vulnerabilities. A senior engineer at a Shanghai-based fab noted that while homegrown equipment has improved, “there’s still a gap in precision and consistency compared to global leaders.” This has led to cautious adoption, with many foundries reserving critical processes for imported machinery.

Revenue Growth Masks Financial Strains

Despite the challenges, domestic equipment makers are expanding their market share. SMIC’s affiliated toolmakers reported a 30% increase in orders for etching and inspection systems, though margins remain thin. One vendor described the situation as “a race to scale before international competitors close the gap.”

The sector’s financial health is closely tied to government support. State-backed loans and subsidies have helped offset some costs, but officials warn that long-term viability depends on technological breakthroughs. “We can’t rely on handouts forever,” said a spokesperson for a leading equipment firm. “Our tools need to prove they can compete on the global stage.”

Meanwhile, foundries are navigating a delicate balance. While embracing local tools reduces reliance on foreign suppliers, it also requires significant upfront investment. One manager at a Suzhou-based facility estimated that full integration could take five years and cost hundreds of millions in upgrades.

The industry’s trajectory remains uncertain. With revenue rising but margins under pressure, the coming months will test the resilience of both equipment makers and the fabs relying on their tools. For now, the focus remains on incremental progress—testing, refining, and hoping for a breakthrough that can shift the balance in favor of domestic innovation.