China’s semiconductor industry investment dropped 9.8% year-on-year to 455 billion yuan (US$63.3 billion) in the first half of 2025, according to research firm Cinno.

Investment in semiconductor equipment rose by over 53%, reflecting efforts to strengthen domestic supply chains.

Wafer manufacturing made up 51% of total industry investment, while chip design and packaging/testing received nearly 19% and 9% of funding, respectively.

Both chip design and packaging/testing saw investment declines of about 24% and 28%, due to weak consumer electronics demand and supply chain disruptions.

About 80% of industry investment was concentrated in Jiangsu, Shanghai, Zhejiang, Beijing, and Hubei.

Spending on semiconductor materials reached 16.2 billion yuan (US$2.3 billion), accounting for over 27% of total funding, with a shift toward high-performance materials needed for EV and 5G.

Cinno said the sector’s future growth will depend on innovation, industrial policy, and international cooperation amid ongoing geopolitical tensions.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Equipment investment surge reflects China’s strategic shift toward self-reliance

The 53% surge in semiconductor equipment investment, despite overall industry investment falling 9.8%, signals China’s prioritization of building domestic manufacturing capabilities over expanding production capacity.

This investment pattern aligns with China’s documented goal to increase domestic semiconductor production from just 16% of total consumption to 70% by 2025, as outlined in the “Made in China 2025” initiative1.

The strategic focus becomes clearer when considering that China has established a $47 billion state fund specifically to support domestic chipmakers like Huawei and SMIC in response to U.S. export controls2.

Equipment purchases represent the foundation needed to reduce dependence on foreign suppliers, particularly as geopolitical tensions have made access to advanced semiconductor technology increasingly restricted3.

This investment approach reflects lessons from previous failed attempts to build domestic semiconductor capacity, where lack of proper manufacturing infrastructure hampered progress despite significant financial commitments1.

2️⃣ Regional concentration mirrors successful semiconductor development patterns globally