China's chip equipment market exceeded $1.7 billion in 2003,
or more than 5% of worldwide tool sales, according to data issued recently by VLSI Research. U.S.-owned OEMs (led by Applied Materials and Novellus) accounted for nearly 55% of the market, followed by Japanese suppliers, who grabbed 29%. The 2003 data—which tally new tool sales as well as service and support spending in the chip, FPD, and MEMS segments—mark the first time that the research company has broken out China as a separate region.

Hua Bai, a project manager with VLSI, says that "there is a shift from 125 mm and 150 mm to 200 mm and 300 mm" in China. The firm estimates that the "Chinese equipment market will grow more than 100% in 2004." Local toolmakers "accounted for less than 5% of the total Chinese equipment market in 2003. We don't expect that Chinese-owned tool companies will capture much market share in the near future in the overall equipment market," notes Bai. "They may gain share in back-end equipment, but not front end."