China Targets 70% Domestic Silicon Wafer Use by End of 2026 as Eswin Scales to 1.2 Million Wafers Per Month

By NineScrolls Team · 2026-05-06 · 5 min read · Industry

The 70% Directive

China is pushing its chipmakers to source more than 70% of their silicon wafers domestically by the end of 2026, according to a Nikkei Asia exclusive published May 5, 2026. The target is described as an internal government directive rather than a formal public policy.

China’s domestic share of the global silicon wafer market sat at roughly 28% in 2025 and is on track to reach about 32% in 2026 on current trajectories, well short of the new internal goal but climbing. The directive functions as an unspoken mandate among Chinese fabs to prioritize locally produced 12-inch wafers over Japanese, Taiwanese, German, and Korean alternatives.

Eswin’s 1.2 Million Wafer Push

The mandate hangs on a single company: Xi’an Eswin Material Technology. Eswin is simultaneously building out wafer plants in Xi’an and Wuhan, targeting roughly 1.2 million 12-inch wafer starts per month in combined capacity during 2026, enough to serve approximately 40% of China’s domestic 12-inch wafer demand and push Eswin’s global market share above 10%.

The Wuhan facility carries a price tag of about CNY 12.5 billion (roughly USD 1.8 billion) and is designed for 500,000 12-inch wafers per month. The Xi’an base is structured in two phases with the same 500,000-per-month design capacity. At full ramp across both sites, Eswin expects total 12-inch capacity to exceed 1.7 million wafers per month.

That single-company concentration is unusual in a market where the top five global suppliers historically share roughly 82% of revenue. Eswin is effectively trying to vault into that top five within a single ramp cycle.

Pressure on Shin-Etsu, SUMCO, GlobalWafers, Siltronic

Today the global silicon wafer market is dominated by Shin-Etsu Chemical and SUMCO of Japan, GlobalWafers of Taiwan, Germany’s Siltronic AG, and Korea’s SK Siltron. By revenue, Shin-Etsu sits near 27%, SUMCO near 26%, GlobalWafers near 17%, Siltronic near 13%, and SK Siltron near 9% — a tight oligopoly that has held for years.

If Eswin delivers anywhere close to its 2026 target, it would be the first Chinese supplier to take meaningful share at the leading-edge 300mm size. The directive specifically points Chinese fabs — including SMIC, Hua Hong, CXMT, and YMTC — toward domestic substrate by default. The implication for the incumbents is that the 20% China end-market they have relied on starts compressing in 2026 and through 2027.

AI Demand and Export Restrictions Drive the Push

Two pressures converge to make the 70% target politically urgent in Beijing. First, AI accelerator and HBM demand has tightened global wafer supply through 2025 and into 2026, with prices firming and lead times stretching. Second, the U.S. Department of Commerce has expanded the perimeter of equipment export restrictions, most recently sending “is-informed” letters in late April 2026 ordering Lam Research, Applied Materials, and KLA to halt shipments of specific tools to two Hua Hong facilities.

For Beijing, controlling the substrate — the silicon disk every chip is built on — is the most basic layer of the supply chain to localize. It also lays groundwork for a fully domestic 7nm-class production line at Hua Hong’s contract chipmaking subsidiary Huali Microelectronics, which is currently building out leading-edge capacity in Shanghai.

What This Means for Plasma Processing and Thin Film Deposition

Eswin’s 1.2-million-wafer ramp is not just a substrate story — it is an equipment story. Bringing two new 500,000-wafer-per-month 12-inch lines online requires crystal pullers, wire saws, edge grinders, double-side polishers, cleaning systems, and epitaxial deposition reactors at scale, plus the fluoride and acid chemical handling, ultrapure water, gas delivery, and vacuum infrastructure that sit underneath them. Epitaxial silicon growth in particular is a CVD-class process that depends on tightly controlled gas delivery, plasma surface preparation, and chamber metrology.

Quality also matters downstream. Every ALD, CVD, PVD, PECVD, and plasma etch tool sold by Applied Materials, Lam Research, Tokyo Electron, ASM International, and the Chinese tier (Naura, AMEC, ACM Research, Piotech) is specified against incoming wafer flatness, thickness uniformity, bow, warp, and particle counts. A surge of new domestic substrate from a single first-generation supplier introduces process-control risk for fabs running 7nm and below, where even sub-nanometer wafer non-uniformity can swing etch depth, deposition thickness, and overlay budgets. Expect process monitoring and metrology suppliers (KLA, Onto, Park Systems, Nova) to see incremental demand inside Chinese fabs as they qualify the new substrate.

For the U.S. and European equipment supply chain, the second-order effect is mix shift. The Chinese fab build-out has been one of the largest sources of ALD/CVD/PVD/etch tool demand in 2025 and 2026. As Beijing locks down the substrate, it tightens the case that downstream deposition and plasma etch tools should follow the same path — favoring Naura, AMEC, ACM, and Piotech inside China. That makes the substrate directive an early indicator for where the deposition and etch wallet ultimately lands. Plasma sources, sputtering targets, gas delivery components, vacuum pumps, and consumables follow the wafer.