Surge in Chip Equipment Imports via Southeast Asia

Chinese semiconductor foundries have set a new record for imports of US-made chipmaking equipment, routing a significant portion of these transactions through Singapore and Malaysia, according to recent customs data and industry reporting. Despite ongoing US export controls targeting China’s advanced semiconductor sector, trade analytics compiled by the Semiconductor Equipment and Materials International (SEMI) indicate that shipments of lithography, etching, and metrology tools to Chinese fabs have reached new highs in Q1 and Q2 2024, with an increasingly large share originating from, or transiting through, Southeast Asian hubs.

Customs records from Singapore and Malaysia show a year-on-year increase of more than 40% in exports of semiconductor manufacturing equipment to China since the beginning of 2024. Trade intermediaries and logistics providers in both countries are reportedly facilitating the movement of equipment originally manufactured by US and allied suppliers, including market leaders like Applied Materials, Lam Research, and KLA, allowing Chinese fabs to continue expanding their production capacities for mature and legacy process nodes.

Domestic Toolmakers Face New Market Dynamics

While Chinese homegrown chipmaking tool providers have posted record bookings for 2025—boosted by both government incentives and orders from domestic fabs—the sector is encountering intensified pricing pressure. According to financial disclosures from Shanghai Micro Electronics Equipment (SMEE) and Naura Technology Group, forward revenue guidance for 2025 is at its highest level on record, with order books swelling by more than 30% year-on-year. However, analysts from Guotai Junan Securities note that profit margins are under strain as competition escalates among local and regional toolmakers to secure market share.

Several factors are driving this squeeze. First, the influx of foreign-made equipment—often purchased via third countries—has given Chinese fabs a wider array of procurement options, enabling more aggressive price negotiations. Second, the rapid expansion of domestic toolmakers has led to oversupply in certain equipment categories, particularly for mature node machinery. Finally, persistent macroeconomic headwinds and uncertainties around future US export controls have made buyers more price-sensitive, favoring lower-cost, domestically produced alternatives where possible.

Strategic and Geopolitical Implications

The continued ability of Chinese fabs to acquire advanced manufacturing tools, even if indirectly, highlights ongoing challenges for US-led export control regimes. Experts at the Peterson Institute for International Economics emphasize that while direct sales of cutting-edge EUV lithography and high-end etching tools remain tightly restricted, the rerouting of legacy and mature node equipment through Southeast Asian countries is proving difficult to police. This dynamic is enabling China to maintain—and in some cases accelerate—its production of chips for automotive, industrial, and consumer electronics, sectors that rely on nodes above 14nm.

At the same time, the rise of China’s domestic toolmakers signals a slow but steady erosion of Western suppliers’ market dominance. Industry sources estimate that Chinese equipment makers now account for over 30% of tools installed at new fabs, compared to less than 15% in 2020. As price competition intensifies, leading domestic firms are investing heavily in R&D to close the technology gap, with state-backed financing helping to offset near-term margin pressures.

Regulatory and Market Outlook

Regulatory authorities in the US and its allies are reportedly considering tighter scrutiny of transshipment routes through Singapore and Malaysia, though enforcement remains complex given the high volume of legitimate trade and the challenges of distinguishing between restricted and unrestricted equipment. Meanwhile, industry observers predict that Chinese homegrown toolmakers will likely continue posting strong revenue growth into 2025, but with profitability increasingly dependent on scale, efficiency, and product differentiation.

For multinational suppliers, the current environment underscores the need for flexible supply chains and robust compliance programs, as well as the reality that China’s vast semiconductor market remains a critical—if increasingly contested—battleground.

Key Takeaways

  • Chinese fabs imported record volumes of US chipmaking equipment in H1 2024, with much of it routed through Singapore and Malaysia to bypass export controls.
  • Domestic Chinese toolmakers have secured record-high bookings for 2025 but are facing intensifying price competition and margin compression.
  • The strategic rerouting of equipment highlights the limitations of current export control regimes and the adaptability of the global semiconductor supply chain.
  • Regulatory scrutiny of Southeast Asian transit hubs is expected to increase, but enforcement challenges persist.
  • Market analysts anticipate a continued shift toward domestic Chinese equipment, with profitability hinging on innovation and operational efficiency amid a crowded competitive landscape.

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