International Tensions, AI Drive Record Chip Spending

Matthew Broersma,
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Automated handlers in an Intel chip plant make selections for semiconductor test validation

AI, government efforts to boost domestic chip manufacturing expected to boost spending on chip tools to record levels

Spending on semiconductor manufacturing tools is to rise to a record $400 billion (£300bn) in 2025-2027, led by chip manufacturers in China, South Korea and Taiwan, according to new figures from industry association SEMI.

The spending is driven partially by demand for excess capacity in geographical regions as countries seek security amidst trade tensions between the US and China, the association said.

Demand for artificial intelligence (AI) chips and related memory chips is also boosting spending, it said.

Spending on equipment is to grow by 24 percent to $123bn in 2025, compared with this year, it estimated.

Workers in a semiconductor plant. Image credit: Intel
Image credit: Intel

Record sales

The biggest vendors are the Netherlands’ ASML, US-based Applied Materials, KLA Corp and Lam Research, and Japan’s Tokyo Electron.

China is expected to remain the top spending region, investing more than $100bn in the next three years driven by its chip self-sufficiency policies, SEMI said.

But Chinese spending is set to decline from record levels this year, it added.

South Korea is expected to spend $81bn in the same period, followed by Taiwan with $75bn.

South Korea is home to leading memory chip makers Samsung and SK Hynix, while Taiwan Semiconductor Manufacturing Co (TSMC) is the world’s biggest contract chipmaker.

The Americas are expected to spend $63bn, Japan $32bn and Europe $27bn.

“Notably, these regions are anticipated to more than double their equipment investment in 2027 compared to 2024 due to policy incentives earmarked to alleviate concerns on the supply of crucial semiconductors,” SEMI said.

International tensions

Regions including the US and the EU have instituted major chip infrastructure spending plans following years of disruption to semiconductor supplies due to the Covid-19 pandemic.

SEMI said this month that China spent more on chipmaking equipment in the first half of the year than South Korea, Taiwan and the US combined, in another indication of the scale of mainland China’s efforts to build up an independent domestic chip industry.

US and international sanctions spurred a frenzy of chipmaking gear sales to China in the first half of this year, as companies joined the government’s efforts to localise chip production and mitigate the risk of further restrictions, SEMI said.

China, the world’s biggest market for chip manufacturing equipment, spent a record $25 billion (£19bn) on chip tools in the first half, with spending remaining strong into July, indicating another full-year record spend could be on the way.

The country is also expected to be the biggest investor in constructing new chip factories, with spending expected to hit $50bn for the full year, including expenditures on chip tools.