China Mandates 50% Domestic Equipment Rule for Chipmakers

China is requiring chipmakers to use at least 50% domestically made equipment when adding new capacity, three people familiar with the matter said, as Beijing pushes to build a self-sufficient semiconductor supply chain, Reuters reported.

The mandate is one of the most significant measures Beijing has introduced to reduce reliance on foreign technology. (Photo: China Daily Global Edition)

The rule is not publicly documented, but chipmakers seeking state approval to build or expand plants have been told in recent months that they must prove through procurement tenders that at least half their equipment will be Chinese-made, the sources told Reuters.

The mandate is one of the most significant measures Beijing has introduced to reduce reliance on foreign technology, a push that accelerated after the U.S. tightened export restrictions in 2023, banning sales of advanced AI chips and semiconductor equipment to China.

While those restrictions blocked sales of some of the most advanced tools, the 50% rule is prompting Chinese manufacturers to choose domestic suppliers even in areas where foreign equipment from the U.S., Japan, South Korea, and Europe remains available.

Applications that fail to meet the threshold are typically rejected, though authorities may grant flexibility depending on supply constraints, the sources said.

The requirements are relaxed for advanced chip production lines, where domestically developed equipment is not yet fully available.