China Ramps Up Semiconductor Equipment Investment Despite Overall Spending Dip
China’s semiconductor sector is entering a transformative phase in 2025, marked by a major reallocation of resources toward equipment manufacturing despite an overall decline in total spending. According to a detailed report from chip market research firm Sino, the industry invested 455 billion yuan (approximately $63.3 billion) in the first half of the year — a 9.8% drop compared to the same period last year. However, investment in semiconductor equipment surged by more than 53%, signaling Beijing’s determination to strengthen its domestic supply chain and reduce reliance on foreign technology.
The chip manufacturing segment remained the largest recipient of funds, capturing 51% of all semiconductor-related investments. Central to this process are high-purity silicon wafers, which provide an ultra-smooth foundation for the creation of intricate electronic circuits through a series of highly controlled manufacturing steps. Once completed, these circuits are sliced into individual chips used in everything from smartphones and laptops to advanced networking systems.
Design and Packaging Segments See Declines
Other parts of the industry experienced setbacks. Chip design accounted for roughly 19% of total investments, while packaging and testing received about 9%. Both areas saw sharp year-on-year declines of around 24% and 28%, respectively. Analysts attribute these drops to a slowdown in global consumer electronics demand and persistent disruptions in international supply chains.
Additional funding went into packaging materials and advanced testing capabilities, which remain critical for ensuring product reliability in sectors such as automotive electronics and next-generation wireless networks.
Geographic Concentration and Regional Leaders
Investment activity was heavily concentrated, with nearly 80% of funds channeled into just five regions. Eastern Jiangsu Province led the way with close to 21% of the national total, followed by Shanghai at around 19% and Zhejiang Province with 14%. Beijing and Hubei Province each secured approximately 12.5%, supported by significant progress in memory chip development.
The Yangtze River Delta — spanning parts of Shanghai, Jiangsu, Zhejiang, and northern Anhui — has solidified its position as China’s manufacturing powerhouse for chip production, packaging, and testing. Sino’s report highlights that favorable talent-attraction policies and strong capital inflows in Shanghai and Beijing have been pivotal in driving cutting-edge advancements.
Materials Sector on the Rise
One of the most notable developments is the surge in materials investment, which reached 16.2 billion yuan in the first half of 2025 — representing over 27% of total semiconductor funding. This shift reflects the industry’s growing move away from traditional silicon toward high-performance alternatives essential for electric vehicles, 5G infrastructure, and smart grid technology.
Experts suggest this trend underscores China’s long-term strategy of precision manufacturing, aiming to target niche but high-value areas of the global market. These materials are expected to play a central role in the next generation of high-speed, energy-efficient electronics.
Future Outlook Amid Geopolitical Challenges
With geopolitical tensions and restrictive trade policies tightening in some international markets, the future of China’s semiconductor growth will likely hinge on three critical factors: breakthrough innovations, well-structured industrial policies, and strategic international collaborations. Industry analysts believe that by maintaining momentum in equipment and materials investment, China can solidify its competitive position in the global chip race while safeguarding its technological independence.