By 2026, the wafer capacity for integrated circuit production is expected to grow at an average annual rate of 7.1%. Following a relatively slow growth in 2024, significant increases are anticipated in 2025 and 2026 with the commissioning of a record number of new wafer fabs. Looking ahead, by 2026, China is projected to surpass South Korea and Taiwan to become the world's largest integrated circuit wafer capacity region.According to Latest reports, the construction of new wafer fabs worldwide has surged since the COVID-19 pandemic. Knometa Research, a semiconductor capacity research firm, suggests that this trend is likely to continue as many countries are offering subsidies to attract domestic semiconductor manufacturing to address supply chain issues exposed during the pandemic.
Global Semiconductor “Subsidy Frenzy”
Large economies, primarily led by the US and the EU, have initially invested nearly $81 billion in the research and mass production of next-generation semiconductors. This is just the first wave of funding.
Leading semiconductor companies like Intel and TSMC have secured nearly $380 billion in government subsidies globally to boost advanced chip production capabilities.
While the US increases its investment, the EU has launched its own $46.3 billion plan to expand local semiconductor manufacturing. The European Commission forecasts that total public and private sector investments in the semiconductor industry will exceed $108 billion, mainly for building large manufacturing bases.
Germany plans to allocate $20 billion as subsidies to boost chip production, with approximately 75% of the funds directed to Intel and TSMC, expected to be in place by 2027.
Germany hosts two major semiconductor fab projects: Intel’s $36 billion wafer fab in Magdeburg, which has received nearly $11 billion in subsidies, and TSMC’s joint venture wafer fab in Dresden, with a total investment of around $10 billion, including $5 billion in government subsidies. The European Commission has yet to approve these projects’ subsidy plans.
Meanwhile, Japan is actively planning. Last month, Japan approved up to $3.9 billion in subsidies for semiconductor company Rapidus Corp., aiming to mass-produce 2-nanometer chips by 2027.
Since June 2021, Japan’s Ministry of Economy, Trade, and Industry has raised approximately $25.3 billion for chip plans, with $16.7 billion allocated to several projects, including TSMC’s Japan foundry.
Unlike the direct funding and subsidies from the US and Japan, the South Korean government prefers to guide and support its financially strong conglomerates. In the semiconductor sector, South Korea’s government has provided support worth an estimated $246 billion.
China to Become the World’s Largest Semiconductor Capacity by 2026
According to the “2024 Global Wafer Capacity Report” by Knometa Research, the wafer capacity for integrated circuit production is expected to grow at an average annual rate of 7.1% by 2026. Following a relatively slow growth in 2024, significant increases are anticipated in 2025 and 2026 with the commissioning of a record number of new wafer fabs.
The report shows that by the end of 2023, South Korea’s capacity accounted for 22.2%, Taiwan for 22.0%, mainland China for 19.1%, Japan for 13.4%, the US for 11.2%, and Europe for 4.8%.
Looking ahead, China’s wafer capacity is expected to show the highest growth over the next few years. By the end of 2023, China’s monthly wafer capacity accounted for 19.1% of the global total, trailing South Korea and Taiwan by a few percentage points. By 2025, China’s capacity share is expected to be on par with the leaders.
Based on wafer fab construction and expansion plans, by 2026, China is expected to surpass South Korea and Taiwan to become the world’s largest integrated circuit wafer capacity source. Meanwhile, Japan’s share is expected to decline from 13.4% in 2023 to 12.9% in 2026.
Most of the foreign companies building fabs in China, including Samsung Electronics, SK hynix, TSMC, and UMC, have received partial exemptions from China’s semiconductor regulations. A significant portion of China’s integrated circuit wafer capacity comes from these large foreign companies, as well as from companies like Powerchip Semiconductor Manufacturing, Texas Instruments’ Alpha & Omega Semiconductor, and Diodes. By the end of 2023, China’s wafer output accounted for about 19% of the global total, with only 11% produced by Chinese companies.
Mainland China Leads Global Semiconductor Equipment Spending
In terms of semiconductor equipment spending, according to SEMI’s “Worldwide Semiconductor Equipment Market Statistics (WWSEMS)” report, global semiconductor manufacturing equipment sales in 2023 slightly decreased by 1.3% from the 2022 record of $107.6 billion to $106.3 billion.
In 2023, mainland China, South Korea, and Taiwan, the top three in chip equipment spending, accounted for 72% of the global equipment market. China remains the world’s largest semiconductor equipment market, with investments in China increasing by 29% year-on-year to $36.6 billion. Due to weak demand and memory market inventory adjustments, South Korea’s equipment spending decreased by 7% to $19.9 billion. After four consecutive years of growth, Taiwan’s equipment sales also decreased by 27% to $19.6 billion.
Annual semiconductor equipment investment in North America grew by 15%, primarily driven by the “CHIPS and Science Act”; Europe grew by 3%; Japan and other regions saw sales decrease by 5% and 39% year-on-year, respectively.
Global sales of wafer processing equipment grew by 1% in 2023, while sales in other front-end fields grew by 10%. Packaging equipment sales declined by 30%, and testing equipment sales fell by 17% in 2023.
