'Whole Nation' approach: China has new chip rule; Chipmakers to source material locally
China has mandated domestic chipmakers to source at least 50% of their equipment locally, a move driven by US export restrictions. This policy, part of President Xi Jinping's tech strategy, aims for complete independence in chipmaking. While flexibility exists for advanced lines, China is pushing for 100% domestic reliance, impacting global players.
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China has reportedly issued a new mandate under which domestic chipmakers will be required to source at least 50% of their equipment from local suppliers. Insiders describe the move as a core component of President Xi Jinping’s ‘Whole Nation’ approach to technology, and it is seen as is a direct response to tightening US export restrictions that have sought to cripple China’s computing capabilities.According to news agency Reuters, the rule remains a “silent” policy (which means undocumented in public records), industry sources say that chipmakers seeking state approval to build or expand plants must now prove they meet the 50% threshold through procurement tenders.“Authorities prefer if it is much higher than 50%. Eventually they are aiming for the plants to use 100% domestic equipment,” Reuters quoted one source as saying.
How US pushed China to bring ‘new chipmaking rule’
Historically, Chinese fabs such as SMIC have preferred American or Japanese equipment. However, the 2023 US export bans on advanced AI chips and tools shifted China’s stance from encouraging domestic growth to mandating it.“Before, domestic fabs like SMIC would prefer U.S. equipment and would not really give Chinese firms a chance. But that changed starting with the 2023 U.S export restrictions, when Chinese fabs had no choice but to work with domestic suppliers,” a former employee at local equipment maker Naura Technology was quoted as saying.
China plans to use 100% domestic equipment
The Reuters report has also said that while the government allows “flexibility” for advanced production lines where local alternatives do not yet exist, China’s ultimate goal is total independence. The “Whole Nation” effort is reportedly producing technical milestones, for example, Chinese scientists are said to be prototyping indigenous machines capable of cutting-edge lithography.This requirement is effectively squeezing global competitors out of the world’s largest semiconductor market, the report said, adding that Chinese firms like Naura and AMEC are already improve through forced domestic partnership. Meanwhile, foreign players like Lam Research and Tokyo Electron now face a shaky footprint in China.