In 2026, China’s semiconductor industry is seeing an unprecedented wave of mergers, acquisitions and restructuring. According to incomplete statistics from ijiwei.com, as of July 7, more than 250 semiconductor-related equity acquisitions, asset investments and project closings had either been completed or were moving forward, spanning materials, equipment, wafer manufacturing, packaging and testing, power devices, third-generation semiconductors and components. This is not a scattershot burst of corporate capital activity. It is a broad reshuffling of resources across China’s semiconductor sector, driven by the push for domestic substitution, rising demands for an autonomous and controllable supply chain, and structural optimization of industry capacity. The wave is reshaping competition across sub-sectors and strengthening the foundation needed to fill supply-chain gaps and manage external uncertainty.

Deal Landscape: High Frequency, Large Projects Cluster

In deal value, the current M&A cycle varies widely. At the small end, Fullhan Microelectronics invested just 4 million yuan for a partial stake in Xinhan Zhixing (Wuxi) Electronic Technology, reflecting how leading companies are taking early positions in frontier areas. Mid-sized transactions are concentrated in the tens of millions to hundreds of millions of yuan range, fitting equity increases by smaller companies and regional capacity buildouts. Deals worth billions or tens of billions of yuan have appeared in quick succession, pushing this M&A cycle to a peak.

SMIC acquired a 49% stake in Semiconductor Manufacturing North China (Beijing) Corporation for 40.601 billion yuan, making it the largest single transaction by total value during the period covered. Beijing Junzheng spent 4 billion yuan to acquire a partial stake in Rongxin Semiconductor (Ningbo), Nexchip Semiconductor invested 1.199 billion yuan in Nexchip Advanced Integrated Circuit Manufacturing (Shaoxing), and National Silicon Industry Group completed the equity closing for Shanghai Simgui Semiconductor with a transaction value of 11.448 billion yuan. The concentration of large-scale capital in wafer manufacturing, specialty process production lines and other core bottleneck segments reflects a strong industry consensus around the strategic value of manufacturing capacity.

By month, M&A activity in the first quarter was dominated by small and mid-sized strategic investments, with monthly deal counts staying between 35 and 45. Industrial consolidation accelerated sharply in the second quarter, with more than 50 transactions completed in each month from April to June. In the first seven trading days of July alone, 11 new M&A projects were added, while industry leaders including Anji Microelectronics and Jianghua Micro disclosed closing announcements, showing unusually strong execution speed. Two forces sit behind that faster cadence. First, a new round of domestic wafer fab expansion plans has begun to land, requiring upstream and downstream companies to use acquisitions to lock in capacity and bind supply chains quickly. Second, demand in sub-sectors such as power semiconductors and memory materials has recovered, improving listed companies’ cash flow and giving them the capital base for industrial acquisitions. Together, these forces have turned M&A and restructuring from an option into a necessity.

Sub-Sectors: Full-Chain Integration, Different Needs at Each Link

Wafer manufacturing is attracting the largest capital inflows in this cycle. SMIC’s acquisition of Semiconductor Manufacturing North China strengthened operational autonomy over Beijing’s 12-inch mature-node production lines and expanded foundry capacity for automotive chips and industrial control chips. Beijing Junzheng’s acquisition of Rongxin Semiconductor filled gaps in memory chip foundry and specialty analog process resources. National Silicon Industry Group’s equity closing for Shanghai Simgui reinforced the capacity base of a domestic leader in 300mm silicon wafers. Regional specialty fabs are also drawing capital: Lanjian Electronics invested 336 million yuan for a stake in Chengdu Xinyi Technology, adding power device foundry capacity; Nexchip Semiconductor completed its Shaoxing production-line acquisition to expand foundry capabilities for new-energy vehicle power chips and AIoT chips. Mature-node production lines have become core acquisition targets because of strong downstream foundry demand from new energy, industrial control and automotive electronics. By acquiring compliant capacity, companies can avoid the long cycle of building new lines while easing pressure from heavy capital expenditure. For now, it is the most efficient expansion route.

M&A in semiconductor materials is focused on category expansion and regional capacity. Jianghua Micro completed two transactions during the year: in July, it acquired a 23.96% stake in Jiangyin Jianghua Microelectronics Materials for 185 million yuan, after previously investing 90 million yuan in a Zhenjiang production base. The moves continue to expand capacity in high-purity wet electronic chemicals, matching consumables demand from multiple 12-inch production lines. Jinhong Gas completed a 4.76% equity acquisition for 510 million yuan, strengthening regional distribution and purification capacity for electronic specialty gases. Tronly New Electronic Materials invested 307 million yuan for a stake in Changzhou Tronly Electronic New Materials, expanding supply of photoresist supporting resins. Anji Microelectronics acquired equity in its Shanghai subsidiary for 862 million yuan, upgrading R&D capabilities for high-end polishing slurry formulations. Some companies have begun cross-border acquisitions: Taiji Industry acquired equity in Xiangyang Xinyiyuan Semiconductor to round out its third-generation semiconductor substrate materials portfolio and use local channels to enter the supply chains of new-energy vehicle makers.

In semiconductor equipment, M&A is centered on in-house component development and expansion into more specialized product categories. Fuchuang Precision completed several deals during the year: in July, it acquired a 1.06% stake in Shenyang Fuchuang Precision Equipment for 848 million yuan, and in May it spent 189 million yuan for a 65% stake in Rion Electronics Technology (Shanghai), continuing to strengthen in-house mass production of precision components and reduce reliance on external sourcing for core parts used in etching and deposition equipment. Taclink increased its stake in Wuxi Taclink Optoelectronic Technology through three transactions, with total consideration exceeding 760 million yuan, adding supporting capacity for packaging and testing of optical communications devices. Huafeng Test & Control completed an equity closing worth 527 million yuan, expanding its tester product lines for analog chips and power devices. Equipment components are a core bottleneck for localization. By acquiring specialized and innovative component makers, leading companies can significantly shorten domestic validation cycles and improve the overall resilience of the supply chain.

The packaging and testing and power device segments show signs of industry clearance and rising market share for leaders. Haoshanghao completed two deals during the year: in July, it acquired 100% of Shenzhen Dingruixin Technology for 84.08 million yuan, and in April it invested 59.5 million yuan in Shenzhen Baoxin Microelectronics, broadening its packaging and testing product categories in the distribution channel. CellWise Microelectronics carried out multiple rounds of in-province target integration, focusing on local packaging and testing companies in Guangdong. Sanan Optoelectronics completed a share transfer, using a strategic investment to optimize its third-generation semiconductor capacity structure. In power devices, Yangjie Technology completed the acquisition of overseas target Caswell Industries for 140 million yuan, establishing an overseas distribution and R&D foothold. Related transactions by Silan Microelectronics and CR Micro continue to advance, with stakes in regional power device makers helping fill capacity gaps in automotive-grade MOSFETs and IGBTs. In third-generation semiconductors, Nexchip Semiconductor has invested more than 3 billion yuan in total to acquire local wafer assets in Hefei, pushing into silicon carbide and gallium nitride device foundry services to meet downstream demand from fast charging and new-energy vehicles.

Underlying Logic: Policy, Industry and Capital Move in Sync

The current M&A wave stems from the synchronized force of policy pressure, industrial demand and capital drivers.

Policy pressure is pushing domestic substitution into an efficiency-first stage. Overseas supply-chain restrictions have become routine, keeping bottleneck risks in China’s domestic supply chain in sharp relief. Companies are no longer limiting themselves to developing a single product category in-house. Instead, they are using M&A to fill gaps quickly: wafer fabs are acquiring upstream silicon wafer and specialty gas suppliers; materials companies are taking stakes in downstream wafer fabs to lock in long-term orders; equipment leaders are buying component makers to complete in-house development chains. Compared with building production lines from scratch, acquiring mature targets can compress technology validation and customer onboarding cycles by three to five years, making it the most efficient path for resource integration during the difficult phase of domestic substitution.

Industry demand is creating rigid expansion needs as downstream markets stay hot. In 2026, new-energy vehicles, energy storage, industrial automation and edge AI hardware remain in strong demand, while orders for automotive-grade power chips, analog chips and memory consumables continue to expand. Listed companies’ existing capacity can no longer match surging demand. Acquisitions that quickly deliver mature production lines, compliant automotive-grade qualifications and stable customer resources have become an efficient way to turn demand into earnings growth. For power device makers, for example, taking a stake in a target with AEC-Q100 automotive certification can provide direct access to leading automakers’ supply chains and eliminate a lengthy product certification cycle.

Capital is also driving the cycle, as valuations return to reasonable ranges and industrial funds provide coordination and support. After earlier valuation corrections, small and mid-sized semiconductor targets have returned to more reasonable valuation levels. With specialized and innovative companies generally facing financing pressure, listed companies now have stronger bargaining power. NAURA’s two equity acquisitions totaling 2.3 billion yuan in Beijing Electronic Control’s industrial investment platform used industrial funds to mobilize large-scale capital and effectively reduce cash-flow pressure. State-owned investment platforms in Jiangyin, Shaoxing and other cities have actively participated in local project approvals and capital contributions, using state backing to reduce policy risk in cross-border and large-scale acquisitions. At the same time, small and mid-sized semiconductor manufacturers generally face insufficient R&D spending, weak customer resources and pressure on profitability, while structural overcapacity in existing industry capacity has become visible. Through acquisitions, leading companies can eliminate outdated, low-yield production lines and upgrade process standards under a unified system. They can also bring targets’ customers and production-line resources into a single operating framework, raising concentration in sub-sectors and improving the industry’s disorderly pattern of homogeneous low-price competition.

Industry Shift: Four Trends Reshape Competition

As M&A integration deepens, China’s domestic semiconductor industry is undergoing a profound shift, with four trends becoming increasingly clear.

Trend one: leading companies are making a step change in overall strength. Top companies in materials, equipment and wafer foundry are using acquisitions to expand capacity, technology and customer resources across multiple dimensions. Their market share in sub-sectors is steadily rising, and China is set to produce a group of globally competitive leaders that gradually narrow the overall capability gap with overseas giants.

Trend two: vertical integration across the supply chain is accelerating. Leading companies are building full-chain positions along the path from upstream components to midstream manufacturing and downstream distribution, sharply improving supply-chain autonomy and control while strengthening their ability to withstand overseas volatility.

Trend three: regional industry clusters are developing in differentiated ways. The Yangtze River Delta industrial hub is using intensive M&A to keep improving supporting industry infrastructure. The Guangdong-Hong Kong-Macao Greater Bay Area is reinforcing resources around power devices and packaging and testing. The differentiated competitive landscape among China’s regional semiconductor clusters will become clearer.

Trend four: the pace of domestic substitution is accelerating significantly. In weak links such as components, high-end consumables and specialty process foundry, localization penetration is expected to rise quickly over the next two to three years, helped by the accumulated technologies of mature acquisition targets.

For listed companies involved in M&A, the central test is not whether transactions can close smoothly, but whether they can execute fine-grained integration after closing. Only by building long-term incentives for core R&D talent, aligning technology development roadmaps across entities and connecting upstream and downstream order coordination systems can companies turn acquired resources into earnings growth and technical barriers. For the industry as a whole, as integration continues, the autonomous and controllable base of China’s domestic semiconductor supply chain will keep strengthening, providing more stable and cost-effective local semiconductor supply for downstream strategic industries including new-energy vehicles, artificial intelligence and high-end equipment manufacturing, and reinforcing the deepest industrial foundation for China’s high-end manufacturing upgrade.

This M&A wave is not short-term capital speculation. It is an inevitable stage in the maturation of China’s domestic semiconductor industry and its structural optimization of existing capacity. The integration has only just begun. The real value creation will emerge gradually through disciplined operations after deals close.