China could be on the verge of reaching a basic level of self-sufficiency in chip-making tools by this summer, something that seemed unlikely just a couple of years ago, according to an industry veteran, although it remains years behind the US in sophistication.

Gerald Yin Zhiyao, chairman and CEO of Shanghai-listed Advanced Micro-Fabrication Equipment China (AMEC), said during a panel discussion last week that China's semiconductor supply chain can achieve self-sufficiency despite gaps in "quality" and "reliability", providing fresh evidence that US restrictions may have accelerated China's chip industry development.

"I had thought we need at least 10 years to find a solution, but with joint efforts from hundreds of companies over the past two years, we can reach basic self-sufficiency by this summer," he said.

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Yin had worked in Silicon Valley from 1984 to 2004 before setting up his own company in China, said during a discussion on Chinese semiconductor equipment on July 22. A video of the discussion was published online by state media outlet China National Radio.

Advanced Micro-Fabrication Equipment China chairman and CEO Gerald Yin Zhiyao speaks at an industry conference in August 2023.

While the capabilities of Chinese chip firms lag those in the US, 80-year-old Yin - who previously worked for Intel, Lam Research and Applied Materials - said he was confident that China could catch up with the best in the industry in another five to 10 years.

The US has reportedly been mulling additional sanctions to cut Chinese foundries off from more semiconductor manufacturing equipment.

It plans to expand the remit of its Foreign Direct Product Rule, which will restrict China's semiconductor equipment imports from countries such as Israel, Taiwan, Singapore and Malaysia, Reuters reported on Tuesday.

The US has been increasing pressure on China's chip sector since October 2022, when it barred for the first time exports of equipment to all Chinese foundries that make advanced logic and memory chips.

The export control rules were further fortified last October, barring ASML from selling some of its less advanced ultraviolet lithography systems to Chinese customers.

The restrictions have forced Chinese suppliers to join together to find breakthroughs that can counter some of these restrictions.

They also provided an opening in the market for China's domestic tool makers, according to Zhang Guoming, general manager of Hwatsing Technology, which makes chemical mechanical planarisation equipment.

AMEC's Yin said 60 per cent of parts used in his company's etching tools are procured domestically, while 80 per cent of components used in its metal organic chemical vapour deposition tools are locally sourced. However, China still has a long way to go to replace all imported tools.

"In the chip tool sector, China still has a large distance from global top players," Yin said. Locally made tools account for an estimated 15 to 30 per cent of those at domestic foundries.

Lithography systems, ion implantation tools and electron beam inspection systems are the weakest areas for Chinese firms, according to Yin.

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