The competition above precision instruments concerns the future of China’s chip industry.
Chip manufacturing is considered one of the most complex processes in the world, with thousands of steps behind a chip the size of a thumb. Any slight flaw can lead to chip failure, making semiconductor testing equipment the “guardian” of chip yield.
With the changing landscape of the global semiconductor industry, mainland China has become the largest semiconductor equipment market in the world, with sales reaching $36.6 billion in 2023. However, the localization rate of testing equipment is still less than 10%, indicating a huge space for domestic substitution.
Testing Equipment: The “Eye of Fire” in Chip Manufacturing
Semiconductor testing can be divided into two main stages: front-end measurement and back-end testing. Front-end measurement involves quality control during the wafer manufacturing process, while back-end testing focuses on testing the electrical performance of chips.
Optical inspection technology currently dominates the market, with a global market share of 81.4% in 2023. As process technology advances to 5nm and 3nm, the defect sizes that testing equipment needs to detect are becoming smaller, leading to increasing demands for sensitivity, accuracy, and speed.
The number of steps in chip manufacturing processes has significantly increased with technological evolution, with the 28nm process having hundreds of steps, while nodes of 14nm and below have nearly a thousand. To ensure a final yield rate exceeding 95%, the yield rate for each step must exceed 99.99%.
Global Landscape: KLA Dominates the Market
The global semiconductor testing equipment market is highly concentrated. KLA Corporation from the United States holds 55.8% of the global market share, with the top five companies collectively holding over 84.1%, all of which are from the United States and Japan.
The back-end testing equipment market is also dominated by international giants, with Japan’s Advantest and the United States’ Teradyne together holding a global market share of 90%. They have formed a monopoly in the high-end testing machine market due to their long-term technological accumulation and complete product lines.
The Path of Breakthrough for Chinese Enterprises
Faced with a highly monopolized market, Chinese semiconductor testing companies are making multiple breakthroughs.
China’s* FeiCe has overcome several key module development challenges for equipment, with products covering wafer defect detection and critical dimension measurement, achieving technical parameters on par with international mainstream levels. The company has applied artificial intelligence and big data technology to semiconductor quality control data, developing software products that enhance the yield of high-end semiconductor manufacturing.
East* Crystal Source has made significant progress in the field of electron beam measurement, with its new generation of electron beam defect detection equipment SEpA-i635 featuring a newly developed ultra-high current pre-charge function, achieving over three times the detection speed of previous models. The company has made significant advancements in high-energy electron beam equipment, achieving comprehensive coverage in the four core areas of front-end electron beam measurement.
Hong* Semiconductor has successfully developed its third-generation SoC testing system in less than four years through self-directed R&D of underlying code. Its high-speed discrete device testing system XI810 features four independent testing channels, making one device equivalent to the efficiency of four other products, yet priced at only 70% of similar foreign products.
Companies like Shanghai JingCe and Shanghai RuiLi are also making continuous breakthroughs in front-end measurement, gradually increasing the market share of domestic equipment.
Future Trends and Investment Opportunities
As the complexity of chip processes increases and three-dimensional structures develop, testing equipment technology is evolving towards high speed, high sensitivity, and high accuracy. Multi-system combination testing and the application of AI and deep learning technologies are becoming new trends in the industry.
SEMI predicts that global semiconductor equipment sales will reach $128 billion by 2025. Sales of semiconductor testing equipment are expected to grow by 7.4% to $6.7 billion in 2024, while sales of assembly and packaging equipment will grow by 10.0% to $4.4 billion.
Investors can focus on several main lines:
Leading companies in niche fields: such as China’s* FeiCe (front-end measurement), Chang* Technology (testing equipment), and Jing* Ce Electronics (measurement equipment) have formed certain advantages in the domestic market.
Technology breakthrough enterprises: such as East* Crystal Source (electron beam detection), and Hong* Semiconductor (SoC testing systems) are leading in specific fields.
Industry chain integrators: such as Sai* Co., Ltd. is entering the testing equipment field through the acquisition of overseas assets.
For ordinary investors, the Kexin Semiconductor ETF (588170) provides an opportunity to easily invest in the semiconductor equipment sector. This ETF focuses on the semiconductor equipment and materials field, covering several leading testing equipment companies, making it a convenient tool for participating in the trend of semiconductor localization.
Conclusion
As the “eyes” of chip manufacturing, semiconductor testing equipment is crucial for improving industry yield and technological advancement. Although international giants currently dominate the market, domestic companies are rapidly rising due to continuous innovation and proximity to market demands.
With the maturation of the domestic semiconductor industry chain and increased policy support, the testing equipment sector is expected to replicate the successful path of the packaging and testing industry, achieving a leap from technological breakthroughs to large-scale development.