China, which has been investing to foster a semiconductor equipment ecosystem, is beginning to assert its presence in key equipment sectors where Japanese corporations have traditionally held sway. Major Chinese equipment corporations are increasing their market share in critical equipment areas such as dry etching and physical vapor deposition (PVD), which are directly linked to semiconductor quality.
Although the exposure to lithography and etching equipment is dominated by American semiconductor equipment corporations such as Applied Materials (AMAT) and Lam Research, the decline of Japanese equipment corporations, which once stood alongside the U.S., has become evident recently. As the quality of Chinese-made equipment improves, the import volumes of Japanese equipment for Chinese semiconductor corporations have decreased, with Japan's share in the global semiconductor equipment market dropping to third place, trailing Europe.
According to data from Morgan Stanley on the 1st, Chinese semiconductor equipment corporations hold a higher market share in the front-end equipment market than expected. Previously, the market share of Chinese semiconductor equipment corporations was unclear or hardly detected in the front-end sector, but as of the end of last year, it was found that the market share of Chinese corporations in dry etching, one of the critical equipment categories, exceeded 12%.
The front-end of semiconductor processing refers to the process of engraving circuits on wafers to complete chips, while the back-end refers to the process of packaging and testing completed chips to create final products. Recently, with the introduction of advanced technologies such as advanced packaging, the importance of back-end processes is increasing; however, traditionally, cutting-edge equipment and technologies, including extreme ultraviolet (EUV) lithography in the front-end, account for the majority of the semiconductor equipment market, which is valued at over 150 trillion won.
According to Morgan Stanley, major equipment corporation China NAURA, known as 'China's AMAT,' along with AMEC, each recorded a 6% market share in the global dry etching equipment market. Similarly, it is noted that NAURA holds a 12% market share in the PVD market, which also impacts semiconductor quality in the front-end. Morgan Stanley interpreted that based on the decline in market share of Japanese equipment corporations, Chinese equipment is encroaching on the market share of Japanese companies.
The self-sufficiency rate of Chinese semiconductor equipment, which had a high import dependency on the U.S. and Japan, is also on the rise. An analysis of data from the General Administration of Customs showed that at the end of last year, imports of semiconductor equipment from the U.S. decreased by 58% compared to 2020, while imports of Japanese equipment fell by 10.7%. A ChosunBiz official noted, 'As some Chinese corporations are improving production stability and quality levels, competition in the domestic market is becoming increasingly fierce. In particular, INJET and NAURA are expanding their deliveries with equipment manufacturers and fabs, strengthening their position in key components.'
In contrast, the market shares of major Japanese corporations such as Tokyo Electron (TEL), Ebara, Nikon, Hitachi, and Kokusai in the front-end equipment sector are on a downward trend. The market share of Japanese corporations in the global semiconductor equipment market has continued to decline since it fell below 30% in 2012, dropping to 21.7% by the end of last year. Japan, which once dominated the market alongside the U.S. in the 1990s, has fallen to third place in the 2020s, even behind Europe.
Meanwhile, Korean semiconductor equipment corporations are increasing their market share by taking advantage of the reduced imports from the U.S. and Japan. According to the General Administration of Customs, sales of Korean semiconductor equipment corporations in China increased from $896 million in 2020 to over $1 billion last year. In particular, last year's sales grew by 42.4%, indicating a rising preference for Korean equipment by Chinese semiconductor corporations.
KOTRA recently stated, 'Chinese semiconductor corporations are seeking high-precision, high-reliability equipment and components to produce high-performance computing chips suitable for the AI era, and the Chinese government is also favoring reliable equipment that complies with local certification standards and customer pre-evaluation procedures.' It emphasized, 'To gain competitiveness in the Chinese market, it is essential to approach not only through product competitiveness but also through responding to local certification systems and establishing strategic partnerships.'