China’s push to localize its semiconductor supply chain is starting to reshape the global chip equipment market, adding fresh pressure on foreign suppliers while accelerating demand for domestic tools.
China has instructed chipmakers to use at least 50% domestically produced equipment when adding new semiconductor capacity.
According to Reuters, authorities are requiring companies seeking approval to build or expand fabs to demonstrate through procurement tenders that at least half of their tools come from Chinese suppliers.
Also Read: Nvidia Eyes Bigger AI Chip Output After China Orders Flood In
Beijing moved faster on the policy after U.S. restrictions limited China’s access to advanced semiconductor and AI technologies from companies such as Nvidia Corp. (NASDAQ:NVDA), Micron Technology Inc. (NASDAQ:MU), and ASML Holding NV (NASDAQ:ASML).
The mandate is forcing Chinese fabs to prioritize domestic vendors, intensifying competition with U.S., Japanese, and European equipment makers that have long dominated China’s market.
U.S. suppliers such as Lam Research Corp. (NASDAQ:LRCX) and Applied Materials Inc. (NASDAQ:AMAT), along with Japan’s Tokyo Electron, face a more challenging operating environment as China shifts procurement away from foreign tools.
Analysts Stay Bullish
Despite the policy shift, analysts remain upbeat on leading U.S. equipment makers. Bank of America Securities analyst Vivek Arya expects Lam Research to post strong growth in 2026, citing demand for advanced foundry, DRAM, and NAND upgrades, as well as sustained AI-driven investment. He named Lam his top pick in the sector.
Arya said Lam’s recent results and guidance exceeded expectations even after accounting for an estimated $200 million impact from tighter China trade rules. He expects Lam’s non-China business to grow more than 20% in 2026 and sees gross margins expanding beyond 50%.
JPMorgan analyst Harlan Sur expects Applied Materials to grow at least in line with the wafer-fab equipment market in 2026, with stronger gains later, driven by advanced packaging and high-bandwidth memory.
Goldman Sachs analyst James Schneider highlighted Applied Materials’ positioning in leading-edge logic, DRAM, and advanced packaging.
Price Action: Applied Materials shares were up 0.52% at $264.43 during premarket trading on Monday. The stock is approaching its 52-week high of $276.10, according to Benzinga Pro data.
Price Actions: Shares of Applied Materials are up 0.39% to $264.09 at the time of publication on Tuesday. Lam Research shares were up 0.07%.
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