China's Semiconductor Ambitions: Billions Invested, But a Decade Behind in the Chip Race

The Great Semiconductor Push

China is pouring tens of billions of dollars into its domestic semiconductor industry, aiming for self-sufficiency and less reliance on Western technology. Companies like Huawei's HiSilicon, SMIC, and YMTC have achieved world-class capabilities in chip design and manufacturing, but equipment still lags far behind, especially in lithography.

The Current State: Progress with Limitations

Only 15%–30% of the tools in Chinese fabs are domestically produced (AMEC estimates); 70%–85% comes from American, European, Japanese, or South Korean firms. Reliance on foreign gear is a vulnerability, worsened by export controls from the West.

China's third "Big Fund" allocates $50 billion to ultra-pure chemistry, silicon wafers, chipmaking hardware, and recently, software and simulation—areas where China is weakest.

A Landscape of Many Players

Dozens of Chinese firms now compete to build fab equipment, but most are small compared to global leaders. Some notable companies:

ACM Research: cleaning, polishing, plating, plasma CVD
AMEC: deposition tools, some 5nm-class
Hwatsing Technology: CMP/polishing
Kingsemi: spin-coating, developer
Naura Technology: etching, annealing
SMEE: lithography leader
Piotech: deposition
YuweiTek: metrology, optical inspection

SiCarrier, with strong government backing, is thought to be Huawei’s chip tool arm and could drive innovation.

The Lithography Challenge: A 20-Year Gap

Chinese firms perform well in mature process nodes like 28nm and above, but lithography—combining optics, materials, and nanotech—is a bottleneck. SMEE’s latest immersion ArF DUV tool claims 28nm capability (introduced 2023), but real deployment is unclear. Their most advanced listed tools reach only 90nm to 280nm—technologies from the early 2000s—whereas ASML reached 28nm DUV machines by 2010 and now leads with 5nm immersion systems.

Goldman Sachs puts SMEE 20 years behind ASML in lithography.

The Engineering Nightmare: Why Lithography Is So Hard

Printing at 5nm with 193nm-wavelength light requires:

Ultra-precision optics: CaF₂ lenses polished to atomic smoothness; Zeiss supplies ASML, inaccessible to China.
Immersion technology: Maintaining micron-thin layers of high-purity water, with flawless fluid control.
Mechanical precision: Sub-nanometer position via mag-lev or air bearings; flawless motion and feedback.
Software complexity: Nanometer overlay accuracy, managing heat, drift, and alignment in milliseconds.

The Path Forward: Challenges and Realities

Chinese firms must re-invent every banned or restricted part, and even reaching 28nm is tough. Progressing to 16nm and beyond isn't linear—it requires whole new tech classes and relentless engineering. Export bans halt access to key systems, and most new Chinese fabs don’t target sub-28nm nodes, making economic viability uncertain.

Conclusion: A Long Road Ahead

China’s investment is immense, but the complexity and restricted access leave it a decade or more behind ASML and others. Genuine progress will need science breakthroughs, domestic supply chain building, and above all, more time. Until then, China's chip dreams will be held at bay by the technical moats built by the world’s leaders.