AI Demand Shifts Semiconductor Equipment Growth to Taiwan and South Korea
A recovery in memory and AI-driven logic investments are replacing China's policy-led expansion as the primary engine of global fab equipment growth.
The global semiconductor wafer fab equipment (WFE) cycle is undergoing a structural shift as the primary driver of growth moves away from China. According to Dr. Robert Castellano, president of The Information Network, demand is now pivoting toward Taiwan and South Korea.
This transition follows a period of intense spending in China, where semiconductor equipment expenditures peaked at over $14 billion quarterly during 2024 and 2025. However, Castellano reports that this growth has since stalled. Momentum has shifted to Taiwan and South Korea, fueled by a recovery in the memory sector and aggressive investments in AI-related logic chips. Castellano notes that while China remains the largest overall market, it is no longer the source of expansion, stating, "The growth has moved to Taiwan and Korea."
The End of Policy-Driven Expansion
For the past decade, China aggressively expanded its semiconductor capacity. This boom was largely supported by government policy and a strategic push for supply chain localization, often referred to as domestic substitution. This policy-driven approach created a massive surge in WFE demand that dominated global growth trends for years, as China sought to reduce its reliance on foreign technology by building out extensive capacity.
The AI Catalyst
This shift represents a fundamental change from policy-driven capacity expansion to technology-driven demand. The current growth in Taiwan and South Korea is tied directly to the artificial intelligence surge, specifically regarding high-end logic chips and high-bandwidth memory. Unlike the legacy-node expansion that characterized China's recent boom, this new cycle benefits the ecosystem of high-end equipment suppliers and advanced foundries capable of producing the most sophisticated AI hardware.
Future Outlook
Industry analysts suggest that this structural change is not a temporary fluctuation but a long-term trend. Castellano indicates that the shift in the equipment cycle is already visible in the underlying data for the 2026–2028 forecast period. Market observers will now be watching whether the AI-driven demand in Taiwan and Korea can sustain the global WFE market as China's era of rapid, state-funded expansion reaches a plateau. This transition underscores a broader industry pivot where the ability to produce cutting-edge AI silicon outweighs the sheer volume of state-funded capacity builds.