Japan’s chip tool makers are feeling China’s push to local gear. As local chipmakers replace imported tools with domestic ones, the biggest Japanese suppliers are seeing their China revenue shrink, even though the market itself is still huge and still buying plenty of kit.
The shift is most visible in the early stages of chip production, where Chinese manufacturers have improved fast enough to chip away at demand for foreign machines. That is bad news for Japan’s toolmakers, but it also shows how export controls and industrial policy can backfire: block one supply route long enough, and the buyer starts building its own.
Tokyo Electron loses share as China buys local
According to Nikkei Asian Review, the five largest Japanese chip equipment suppliers generated $9.11 billion in China in the last fiscal year, down 12% from the previous year. Tokyo Electron, which once depended heavily on the market, saw China fall from 34% of sales to 27% in the last quarter, after reaching 50% in the second calendar quarter of 2024.
That is a sharp reminder that China’s semiconductor spending is not the same thing as foreign vendors’ sales. The market was still worth $49.3 billion last year, or 37% of the global total, but a larger share of that money is now staying inside China.
Where the pain is hitting hardest
The biggest drop is happening in equipment used at the front end of chipmaking, especially wafer processing. That’s the part of the factory where Chinese suppliers have made the strongest progress, so buyers have less reason to import.
ASML is feeling the same squeeze from the other side of the market. Its China share fell from 27% to 19% in the first quarter of this year, which suggests this is not a Japan-only problem but a broader shift in the global supply chain.
End-stage tools are still selling
Japan is not being shut out across the board. In back-end chip processing, Chinese customers are still buying Japanese gear, and in some cases buying more of it. Advantest lifted China revenue by almost 20% last year, while Disco added about 10%.
- Five largest Japanese chip equipment suppliers in China: $9.11 billion
- Year-on-year change: down 12%
- China’s chip equipment market: $49.3 billion
- China’s share of the global market: 37%
The bigger question is how far this can go. Chinese chipmakers still need imported tools in several parts of the production chain, and their own exports are rising, which gives them more cash to keep replacing foreign vendors. That leaves Japanese suppliers with an awkward choice: chase a market that is still enormous, or accept that some of its growth is now reserved for domestic rivals.