Executive summary Executive summary Introduction Foundational semiconductors China was the world’s largest semiconductor manufacturing equipment (SME) market in 2023 and was the This report refers to semiconductors at 28 nm leading global SME importer. This report, a follow-up to Silverado’s Foundational Fabs report, provides a or larger as “foundational” semiconductors detailed analysis of China’s SME imports in 2023. A comprehensive set of recommendations related to the rather than “legacy” or “mature,” which implies semiconductor industry can be found in the Foundational Fabs report. that these semiconductors are less important, Key Findings and that innovation is no longer occurring. Foundational semiconductors are critical to the • China made significant investments in new semiconductor production capacity in 2023 and plans major production of nearly all the goods we consume additional investments in 2024. China is projected to account for 27 percent of global semiconductor and are used in everything from consumer production capacity in 2024. It’s share of foundational capacity is even higher. electronics to medical devices to autos. • China accounted for 31 percent of global SME sales in the first nine months of 2023. Foundational semiconductors also play an indispensable role in fulfilling vital functions • China was the largest global importer of SME in 2023, with imports totaling a record $42.5 billion. China across various defense applications, from imported almost $15 billion more than Taiwan, the second largest importer. communications systems to missile guidance. • The leading sources of imports in 2023 were Japan, the Netherlands, Singapore, and the United States. Foundational semiconductors continue to Singapore and Hong Kong reported significantly higher exports than China reported imports from these undergo innovations to adapt to new sources, indicating that some of their exports to China are likely re-exports. applications, including those that are critical to • The main supplying countries varied by product type. The Netherlands and Japan, for example, were the meeting decarbonization targets. leading suppliers of lithography equipment to China, while Singapore was the largest supplier of chemical Foundational semiconductors account for most vapor deposition equipment. of the semiconductors produced each year and • China imported a broad range of equipment types in 2023. However, a substantial increase in the value are expected to continue to account for the of lithography equipment imports was the biggest driver of the growth in imports in 2023. majority of the market in the near future. Notes/Sources: David, Andrew, Haley Ryan, Mihir Torsekar, Yumi Gambrill, and Sarah Stewart, Foundational Fabs: China's Use of Non-Market Policies to Expand Its Role in the Semiconductor Supply Chain, Silverado Policy Accelerator, Oct 2023, https://silverado.org/news/report-foundational-fabs-chinas-use-of-non-market-policies/; Global Trade Tracker; SEMI, “Q3 2023 Global Semiconductor Equipment Billings Drop 11% Year-over-Year, SEMI Reports,” Nov 30, 2023, 5 https://www.semi.org/en/news-media-press-releases/semi-press-releases/q3-2023-global-semiconductor-equipment-billings-drop-11-percent-year-over-yer-semi-reports; SEMI, “Q2 2023 Global Semiconductor Equipment Billings Dips 2% Year-over-Year, SEMI Reports,” Sep 6, 2023, https://www.semi.org/en/news-media-press-releases/semi-press-releases/q2-2023-global-semiconductor-equipment-billings-dip-2-percent-year-over-year-semi-reports.