UBS China Semiconductor Equipment: Strong Lithography Imports Signal Accelerating Tier-1 Expansion

UBS observes that China's semiconductor production equipment (SPE) imports rebounded strongly in December 2025, jumping 95% month-over-month, though declining 9% year-over-year due to a high base. Lithography equipment imports were particularly robust, surging 222% month-over-month and 59% year-over-year to reach USD 2.3 billion. This category accounted for an unusually high 55% of total SPE imports, far exceeding the typical 20-25% range for wafer fabrication equipment spending. This surge was primarily driven by tier-1 regions including Beijing, Shanghai, and Guangdong. These areas imported high-value lithography tools with elevated average costs per unit, signaling that local foundries are accelerating capacity expansion. Shanghai imported 12 tools averaging USD 75 million each, while Beijing brought in seven averaging USD 95 million. Conversely, etch and deposition imports remained soft year-over-year. The Netherlands emerged as China's largest SPE exporter, driven entirely by lithography demand. For the full year 2025, total SPE imports reached USD 34.7 billion, up 3% annually, demonstrating resilient demand despite ongoing localization efforts. UBS forecasts China's WFE spending will grow 10% in 2026 and 1% in 2027. Newly released regional five-year plans further underscore sustained local government commitment to semiconductor and AI investment. UBS designates NAURA as a Key Call Buy and ACMR Shanghai as a Buy.