China's 50% Domestic Equipment Mandate: Unveiling High-Conviction Winners in the Semiconductor Equipment Sector

China's semiconductor industry is undergoing a seismic shift as the government enforces a 50% domestic equipment mandate for new fabrication plants, a policy designed to accelerate self-sufficiency in chip manufacturing. This requirement, confirmed by industry sources and aligned with the broader "Made in China 2025" initiative, mandates that chipmakers demonstrate at least half of their equipment is sourced locally. The policy, which has intensified since U.S. export restrictions on advanced semiconductor technology began in 2023, is already reshaping the market, displacing foreign firms and fueling demand for domestic suppliers like Naura Technology and Advanced Micro-Fabrication Equipment (AMEC) according to industry analysis.

Market Dynamics and Policy Impact

The 50% mandate is not merely a regulatory hurdle but a strategic imperative for China's semiconductor ambitions. Authorities have expressed a preference for domestic equipment ratios exceeding 50%, with long-term goals of achieving 100% local sourcing. This has triggered a surge in local patent filings and financial performance improvements among domestic equipment suppliers. For instance, AMEC's etching equipment sales grew by 54.72% year-on-year in 2024, driven by its Primo D-RIE and LPCVD tools, which are now seeing rapid market adoption. Similarly, Naura Technology, which led China's A-share listed chip companies in R&D spending in Q3 2025 with 3.285 billion yuan, is projected to capture 10% market share in China and reach $3.7 billion in IC manufacturing sales by 2025.

The policy's impact on foreign firms is equally profound. U.S., Japanese, and European equipment suppliers are increasingly being sidelined as Chinese chipmakers prioritize domestic alternatives. This shift is accelerating the localization of critical processes such as etching, deposition, and thin-film production, where domestic firms are now achieving key milestones in advanced manufacturing.

High-Conviction Winners: Naura Technology and AMEC

Naura Technology stands out as a direct beneficiary of the mandate. With its aggressive R&D focus and strategic alignment with global giants like Applied Materials, Naura is positioned to dominate etching and thin-film deposition equipment markets. Its 2024 revenue is projected to grow by 25–43.93%, reflecting strong demand for its high-purity gas production systems and advanced packaging solutions. Analysts note that Naura's ability to scale production while maintaining technological parity with foreign competitors makes it a compelling long-term investment.

AMEC, meanwhile, has leveraged the mandate to expand its footprint in high-end IC equipment. The company's 2024 revenue of ¥9.065 billion-a 44.73% year-on-year increase-underscores its dominance in etching and deposition systems. AMEC's R&D expenditure, which reached 96.30% of its revenue in Q3 2025, has enabled breakthroughs in thin-film deposition and advanced packaging, with a stated goal of achieving 60% coverage of high-end IC equipment within five to ten years.

Technological Advancements and Market Growth

The mandate is also spurring innovation in critical semiconductor processes. For example, the China semiconductor cleaning and etching gas market, valued at 13.45 billion yuan in 2025, is expected to grow at a 9.16% CAGR through 2033, driven by AI-driven demand for 3D scaling and hybrid bonding technologies. Companies like Lam Research and Applied Materials have highlighted the rising intensity of etch and deposition processes, a trend mirrored by domestic firms like Naura and AMEC.

Challenges and Risks

Despite the tailwinds, risks persist. U.S. export controls and over-capacity in mature nodes (28 nm and above) could dampen growth in the short term. Additionally, achieving full self-sufficiency will require sustained R&D investment and technological breakthroughs in areas like EUV lithography, where domestic firms still lag.

Investment Thesis

For investors, the 50% domestic equipment mandate represents a structural inflection point. Naura Technology and AMEC are not only capitalizing on policy-driven demand but also demonstrating the technical and financial resilience to compete globally. With the China semiconductor foundry market projected to grow at a 12.40% CAGR through 2030, these firms are well-positioned to capture a disproportionate share of the value chain.

In a landscape defined by geopolitical tensions and supply chain reconfiguration, the winners will be those who align with China's self-sufficiency agenda while maintaining technological agility. Naura and AMEC exemplify this dual strength, making them high-conviction picks for the rapidly scaling chip equipment sector.