Material Insights · Understanding the Material World

Machinery and equipment and Semiconductors

Chipmaking depends on a few makers of fab tools, and those tools are now a target of export controls; in the other direction, machines from CNC lathes to pumps need power and control chips, so each industry is a supplier to the other.

Machinery and equipment (industry) and Semiconductors (industry): 4 relationships.

How they are linked

1. Buys from

Physical flow · ₹2.6 per ₹100 · Semiconductors buys from Machinery, and Machinery buys from Semiconductors

Chip plants buy process tools, pumps, robots and spare parts, while machine makers buy power modules, sensors and controllers.

  • ₹2.6 of every ₹100 of Semiconductors output spent on machinery, all rounds (India 2022)
  • ₹2 of every ₹100 of Machinery output spent on chips, all rounds

In India the flows are small because chip output is still tiny and fab tools are capital goods, not inputs. Yearly price changes are moderately linked (correlation about 0.54, India WPI; 0.19 monthly).

Sources: OECD; Material Insights (World Bank, FRED, IMF data)

2. Industry input

Physical flow · Criticality 5 of 5 · Machinery to Semiconductors

Five enterprise types in semiconductors depend on machinery; foundries and fab-tool makers are rated 5 because a fab cannot run without its tools and spare parts.

Lithography tools in particular come from very few suppliers: ASML is the only maker of EUV machines. In the other direction, motor, drive, CNC and automation-control makers depend on power modules and controllers, rated 4 of 5.

Enterprise types that depend on it:

  • Motor, drive, CNC and automation-control makers: power modules and controllers (criticality 4 of 5)

Sources: Material Insights; Material Insights; Caixin Global

3. Fab investment cycle

Transition · Strong · Chip investment drives equipment orders

When chipmakers add capacity they buy tools, so equipment sales rise and fall with fab spending.

  • US$ 135.1 billion world chip equipment sales, 2025, up 15% from US$ 117.1 billion
  • about 36% China share of world equipment spending, 2025 (US$ 49.3 billion of US$ 135.1 billion)

Spending in Taiwan rose 90% to US$ 31.5 billion and in Korea 26% to US$ 25.8 billion in 2025, driven by AI chips and memory; China, Taiwan and Korea took 79% of the total. North America fell 20% and Europe 41%, so the market is concentrated in East Asia.

Sources: Semicon Leaders Asia

4. Export controls on fab tools

Shared risk · Strong · Rules limit which fabs can buy advanced tools

The most advanced tools come from a few countries, so their governments can restrict sales to rival chipmakers, and toolmakers' sales shift with the rules.

  • 33% China share of ASML sales, 2025
  • about 20% China share ASML expects in 2026

US rules tightened in October 2023 further limited shipments of ASML's most advanced DUV lithography tools to China. Caixin describes ASML's China sales in 2025 as a backlog-fuelled surge that the company expects to fall back in 2026. India's first commercial fab, at Dholera, is itself to use ASML lithography tools.

Sources: Caixin Global; Business Today

For investors

Key learnings

  1. Equipment sales follow fab investment, which reached a record US$ 135.1 billion in 2025, led by AI and memory spending.
  2. China was about 36% of equipment spending in 2025, so export controls are a direct earnings risk for toolmakers.
  3. Motor, drive and CNC-control makers depend on power and control chips (rated 4 of 5), so chip shortages can hold up machinery output.

What to track

  • World chip equipment billings by region: Rising billings signal fab expansion and toolmaker revenue (Quarterly · SEMI)
  • Toolmaker orders and China share: A falling China share shows export controls biting (Quarterly · ASML and other company results)
  • Export control rule changes: New limits reduce addressable market for advanced tools (As issued · US BIS, Dutch and Japanese governments)

For policymakers

Key learnings

  1. Fab tools are a chokepoint: a few suppliers and governments decide who can build advanced chips.
  2. India's first commercial fab at Dholera is to get its lithography tools from ASML, so supplier relations and allied export rules matter as much as subsidies.
  3. Domestic machinery makers need reliable chip supply for CNC and automation controls, linking chip policy to capital goods.

What to track

  • Tool delivery for Indian fab projects: Delays push back the start of production (As announced · MeitY, company releases)
  • Imports of semiconductor manufacturing equipment: Shows the pace of fab construction in India (Monthly · DGCI&S)
  • Allied export control lists: Changes can affect tool access for third countries (As issued · US BIS, Wassenaar participants)

India

India's first commercial fab, Tata Electronics' 300 mm plant at Dholera, is to use ASML lithography tools under a partnership signed in May 2026, so Indian chipmaking will rely on foreign toolmakers.

Sources

  1. OECD Input-Output Tables 2025 edition, India 2022, OECD
  2. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  3. Industry map: Semiconductors, Material Insights (2026)
  4. Industry map: Machinery and equipment, Material Insights (2026)
  5. Global semiconductor equipment market hits record $135 billion in 2025 (SEMI data), Semicon Leaders Asia (2026)
  6. ASML expects China revenue drop following backlog-fueled surge, Caixin Global (2026)
  7. ASML, the world's top chip tool maker, is backing Tata's Gujarat fab, Business Today (2026)