Chinese Chip Toolmakers See 400% Profit Surge as Western Suppliers Face Two-Year Backlogs

Chinese manufacturers of semiconductor fabrication equipment have reported a dramatic surge in profits during the first half of 2024, with some companies posting a 400% year-over-year increase, according to a report by local media outlet JW Insights.

The boom is driven by a global shortage of chip-making machinery, itself a consequence of the artificial intelligence explosion. Leading Western, Korean, and Japanese equipment suppliers—including ASML, Tokyo Electron, and Applied Materials—have extended their delivery lead times to as long as 24 months. The backlog covers a wide range of tools used throughout the semiconductor manufacturing process: deposition, etching, cleaning, testing, and packaging equipment.

Chinese firms, which offer shorter lead times and benefit from growing domestic demand, are now positioned to capture market share during what analysts describe as a historic period of capacity expansion in the semiconductor industry. Most major Chinese chip equipment makers reported double-digit revenue growth in the first half of 2024.

Lithography remains the most critical bottleneck, particularly for advanced nodes. ASML, the world's sole supplier of extreme ultraviolet (EUV) lithography machines, has a backlog stretching up to two years. However, in non-lithography segments—such as deposition, etching, and wafer testing—Chinese suppliers are increasingly replacing foreign imports.

The trend is reshaping the global semiconductor supply chain. As TSMC, SK hynix, Samsung, and other major chipmakers expand their fabs to meet AI-driven demand, the pressure on equipment supply chains has intensified. Chinese toolmakers, with their faster turnaround and aggressive capacity expansion, are capitalizing on this window of opportunity, potentially altering the competitive landscape for years to come.