China’s semiconductor industry is undergoing a profound transformation, driven by a combination of geopolitical pressures, technological ambition, and massive government-backed initiatives. As the world’s largest consumer of semiconductors, China is accelerating efforts to localize its production and reduce reliance on foreign technology. Recent developments, including a rumored plan to consolidate over 200 chipmaking tool firms into just 10, the strategic acquisition of Kingsemi by Naura Technology, and a projected self-sufficiency rate of 50% by 2025, signal a bold push toward technological autonomy. This blog article explores these pivotal shifts, their implications for China’s semiconductor ecosystem, and the global impact of this transformation.

The Consolidation Push: From 200 Firms to 10

China’s semiconductor equipment sector has long been fragmented, with over 200 domestic firms operating in a crowded and often inefficient market. Many of these companies rely heavily on government subsidies, which, while fueling growth, have led to redundancy and limited innovation. According to a report by TrendForce, China is now exploring a drastic solution: merging these 200 firms into just 10 key players to streamline operations, boost efficiency, and enhance global competitiveness.

This consolidation plan, reported by Korean media outlet etnews, is a response to tightening U.S. chip export controls and a broader push for self-reliance. Over the past decade, Beijing has invested approximately 1.33 trillion yuan (about $183 billion USD) to bolster semiconductor self-sufficiency, yet the results have been modest, with a current self-sufficiency rate of just 23%. By reducing the number of players, China aims to create a handful of highly competitive, well-funded companies capable of challenging global giants like ASML, Applied Materials, and Lam Research.

The consolidation is already underway. For instance, Naura Technology, China’s largest semiconductor equipment maker, has emerged as a central figure in this strategy, leveraging acquisitions and technological advancements to expand its influence. This move not only addresses inefficiencies but also aligns with China’s broader goal of building a robust, self-sufficient semiconductor supply chain.

Naura Technology’s Strategic Acquisition of Kingsemi

A key example of China’s consolidation efforts is Naura Technology’s acquisition of a 9.5% stake in Kingsemi, a domestic photolithography coating equipment manufacturer, for RMB 1.69 billion (approximately $232.8 million USD). According to ijiwei and Economic Daily News, Naura plans to increase its stake within a year to gain control, potentially securing a total of 17.9% ownership if it succeeds in acquiring an additional 8.4% stake from Kingsemi’s third-largest shareholder, Shenyang AMT.

Kingsemi is a critical asset in China’s semiconductor ecosystem, as it is the only domestic supplier capable of mass-producing front-end coating and developing machines. This acquisition fills significant gaps in Naura’s portfolio, adding capabilities in coating, chemical cleaning, and bonding—areas essential for advanced chip manufacturing. Naura, already a leader in etching, thin-film deposition, and cleaning/epitaxy with market shares of 30%, 25%, and over 2% respectively, is positioning itself as a comprehensive platform-type equipment provider.

Naura’s rise is notable on the global stage as well. Ranked sixth among the world’s top semiconductor equipment vendors by revenue in 2024, Naura trails only industry giants like ASML, Applied Materials, Lam Research, Tokyo Electron, and KLA. Its 2024 revenue forecast of RMB 27.6 billion to RMB 31.78 billion (approximately $4.4 billion USD) reflects a year-on-year growth of 25% to 43.93%, underscoring its financial strength and market momentum. By acquiring Kingsemi, Naura is not only consolidating domestic capabilities but also enhancing its ability to compete with global leaders.

Aiming for 50% Self-Sufficiency by 2025

China’s semiconductor equipment industry is experiencing a boom, driven by strong domestic demand and significant technological advancements. According to TechNews and the China Semiconductor Industry Association, China’s self-sufficiency rate in semiconductor equipment has risen to 13.6% as of 2024, with notable progress in photoresist stripping, cleaning, and etching equipment. TrendForce reports suggest that this rate could reach 50% by 2025, a remarkable leap fueled by companies like Naura, AMEC, and ACM Research.

This progress is underpinned by China’s position as the world’s largest semiconductor consumer market, which provides substantial demand to drive domestic innovation. Companies like Naura have achieved scale and technological maturity, while AMEC and ACM Research are experiencing accelerated growth. Specialized manufacturers such as Piotech, Kingsemi, and Hwatsing are also contributing to advancements in areas like CMP, thermal processing, and thin-film deposition.

However, challenges remain. China’s biggest weaknesses lie in lithography systems, testing, and assembly tools, where it lags behind global leaders. The U.S. has imposed stringent export controls, targeting advanced semiconductors and manufacturing equipment to prevent Chinese firms from advancing into cutting-edge technologies like FinFET and GAAFET. Despite these restrictions, Chinese firms have made significant strides in mature nodes (28nm and above), where domestic demand is high, and are expanding capacity rapidly.

Geopolitical Context and Global Implications

China’s push for semiconductor self-sufficiency is inseparable from the broader geopolitical landscape. U.S. sanctions, including export controls on advanced chips and equipment, have forced China to accelerate its localization efforts. The Biden administration’s crackdowns, such as the December 2024 restrictions on 140 Chinese companies, including Naura, Piotech, and ACM Research, aim to curb China’s ability to produce chips for military and AI applications. These measures, combined with actions from allies like Japan and the Netherlands, have limited China’s access to critical technologies like EUV and DUV lithography systems.

Yet, China’s response has been resilient. Companies like SMIC and Huawei have made progress in mature-node production and even achieved breakthroughs in advanced chips, such as Huawei’s 7nm-class smartphone processor. China’s massive investments—bolstered by initiatives like the $47.5 billion Big Fund announced in 2024—continue to fuel innovation and capacity expansion. Analysts expect China to add more chipmaking capacity than the rest of the world combined in 2024, with its share of global mature-node production projected to grow from 31% in 2023 to 39% by 2027.

Globally, China’s transformation has significant implications. Its growing dominance in mature nodes could disrupt markets traditionally led by Taiwanese and Korean manufacturers. However, overcapacity risks, as flagged by SMIC, and ongoing U.S. sanctions may temper China’s ambitions in the short term. For now, China’s focus on consolidation, strategic acquisitions, and technological advancements positions it as a formidable player in the semiconductor industry.

Conclusion: A Transformative Journey

China’s semiconductor industry is at a pivotal moment, marked by ambitious consolidation, strategic acquisitions, and a relentless drive toward self-sufficiency. The rumored plan to merge 200 chipmaking tool firms into 10 reflects a strategic effort to streamline operations and build globally competitive giants. Naura Technology’s acquisition of Kingsemi underscores the practical steps being taken to enhance domestic capabilities, while the projected 50% self-sufficiency rate by 2025 highlights the rapid progress in China’s equipment sector.

Despite challenges posed by U.S. sanctions and technological gaps, China’s semiconductor ecosystem is evolving rapidly, driven by government support, domestic demand, and corporate innovation. As companies like Naura, AMEC, and ACM Research continue to scale, China is not only catching up but positioning itself to lead in key segments of the global semiconductor market. The coming years will be critical in determining whether China can achieve its vision of technological autonomy and reshape the global semiconductor landscape.

Learn more here: https://www.trendforce.com/news/2025/04/28/news-china-rumored-to-speed-up-semiconductor-integration-as-it-aims-to-merge-200-chipmaking-tool-firms-into-10/