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China's top chipmakers like Semiconductor Manufacturing International Corporation (SMIC) and ChangXin Memory Technologies are doubling down on localizing the supply of key materials to counter U.S. export restrictions. This initiative extends beyond using domestic chip-making equipment to sourcing hundreds of chemicals, materials, and gases, potentially edging out foreign suppliers.

SMIC was added to Washington’s entity list, a trade blacklist, in late 2020 and has since been exploring domestic supply alternatives to ensure continuity of production.

Chinese suppliers now have increased opportunities for verification and adoption due to this aggressive push to reduce reliance on foreign materials. The drive, while initially targeting less advanced chip production processes, ultimately aims to implement domestically sourced materials in more advanced production stages.

China is increasing its domestic sourcing of key materials such as sputter targets, polishing pads, slurry and ultra-purity chemicals and gases, all crucial elements in chip manufacturing and all previously dominated by foreign suppliers such as 3M, DuPont and Sumitomo Chemical.

Some little-known materials and chemical makers have emerged as so-called national champions.

The localization efforts have triggered the exit of several foreign chip packaging and testing services from the Chinese market. More than five such companies — ASE Tech Holding, Qorvo, Powertech, Western Digital and King Yuan Electronics — have sold majority stakes in their China operations since 2021. China’s outsourcing sector for chipmaking packaging and testing services is already the second largest in the world after Taiwan’s.

Editor：Lulu

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