In a move that underscores the evolving dynamics of global semiconductor supply chains, Singapore-headquartered ASMPT Limited (ASM Pacific Technology), a leading provider of semiconductor assembly and packaging equipment, announced on August 11, 2025, the closure of its wholly owned subsidiary, ASMPT Equipment (Shenzhen) Co., Ltd., located in Shenzhen’s Bao’an district.
This decision affects approximately 950 employees and is projected to incur a one-time restructuring charge of around US$50 million (or RMB 360 million), covering severance payments, shutdown costs and inventory write-offs. While the company frames the closure as a strategic optimization to enhance efficiency, it raises questions about underlying pressures in China’s high-tech manufacturing sector and its ripple effects on the broader economy.
ASMPT’s official rationale centres on operational efficiency and supply chain resilience. The closure is described as part of a “strategic optimization of manufacturing operations” aimed at streamlining the company’s global footprint to better adapt to shifting market demands and customer needs.
Specifically, the move is expected to generate annual operating cost savings of approximately RMB 115 million based on current production levels, thereby improving cost competitiveness, agility, and supply chain flexibility. ASMPT has emphasized that its other key global manufacturing sites remain unaffected, and the company remains committed to the Chinese market, with supply chains aligned to ensure uninterrupted product delivery.
This can be interpreted as a response to intensifying competition in the semiconductor equipment industry, where margins are under pressure from volatile demand cycles. For instance, the facility in Shenzhen, established in 2019, focused on advanced semiconductor packaging solutions, but consolidating operations elsewhere could reduce redundancy and overheads. This aligns with broader industry trends, where firms like ASMPT are rationalizing production amid a post-pandemic slowdown in electronics demand and overcapacity in certain segments.
However, the abrupt nature of the announcement – employees were informed verbally on August 11, 2025, of a forced dismissal by August 13 – sparked worker protests, leading to negotiations that resulted in compensation packages of “N+3” (where N represents years of service) plus an additional RMB 3,000 per employee. This highlights the human cost of such restructurings, even as the company positions the closure as a long-term boost to profitability.
While ASMPT’s statements avoid explicit mention of external pressures, the closure occurs against a backdrop of escalating U.S.-China trade tensions and supply chain “de-risking” strategies. The semiconductor sector has been a flashpoint, with U.S. export controls since 2019 restricting access to advanced technologies, including equipment from firms like ASML (a Dutch lithography giant often conflated with ASMPT in discussions, though they operate in different niches).
Although ASMPT specializes in back-end processes like packaging rather than front-end wafer fabrication, the broader ecosystem is interconnected, and restrictions on upstream suppliers could indirectly impact demand for ASMPT’s tools in China.
Foreign direct investment (FDI) in China has been waning, with manufacturing firms citing rising labour costs, regulatory uncertainties, and geopolitical risks as factors prompting relocations to Southeast Asia or reshoring to home markets. For example, ASMPT’s decision mirrors actions by other multinationals optimizing away from China to mitigate tariff risks and supply disruptions.
While the closure is framed as cost-driven, it may also reflect a strategic pivot to diversify away from over-reliance on Chinese production amid U.S. sanctions that have already curtailed sales of advanced gear to Chinese firms.
Moreover, China’s domestic semiconductor ambitions – bolstered by initiatives like “Made in China 2025” – have faced setbacks, with projects like Wuhan HSMC and Shanghai Woodson collapsing despite billions in funding due to talent shortages, IP challenges, and export curbs. ASMPT’s exit from Shenzhen could signal eroding confidence in China’s ability to sustain a self-reliant chip ecosystem, exacerbating these vulnerabilities.
Shenzhen, often dubbed China’s “Silicon Valley,” has built its prosperity on high-tech manufacturing, attracting firms like Huawei and Foxconn. The ASMPT closure directly results in 950 job losses in a city where the semiconductor industry employs hundreds of thousands. This could strain local labour markets, particularly as unemployment among urban youth (aged 16-24) hovers around 15-20%. Protests at the site underscore potential social unrest if similar closures proliferate.
Economically, the shutdown may reduce local tax revenues and ancillary business for suppliers, though the impact is mitigated by ASMPT’s relatively small scale compared to giants like TSMC. However, it contributes to a narrative of “factory exodus,” with data showing a 12% drop in FDI into China in the first half of 2025, partly due to manufacturing relocations.
On a national scale, ASMPT’s closure is emblematic of challenges facing China’s economy, which is grappling with deflationary pressures, a property crisis, and weakening exports. The semiconductor sector, a cornerstone of China’s industrial upgrade strategy, imports over $300 billion in chips annually – more than oil – making it highly sensitive to global disruptions. Closures like this could accelerate “decoupling” trends, where foreign firms reduce exposure to China, potentially slowing technology transfer and innovation.
Analytically, this exacerbates China’s “middle-income trap” risks: while low-end manufacturing migrates to cheaper locales like Vietnam, high-end sectors face barriers from Western sanctions. The result? Stunted growth in strategic industries, with GDP forecasts for 2025 revised downward to around 4.5% by institutions like the IMF, partly due to trade frictions. If more firms follow ASMPT’s lead, it could erode investor confidence, leading to capital outflows and a vicious cycle of reduced R&D investment.
Conversely, optimists argue that such pressures spur domestic innovation, as seen in Huawei’s advancements despite sanctions. China has ramped up subsidies for local chipmakers, aiming for 70% self-sufficiency by 2030. Yet, failures in projects like AMS (liquidated after $1.8 billion in funding) highlight execution gaps.
In summary, ASMPT’s Shenzhen closure, while operationally motivated, reflects deeper geopolitical and economic headwinds. For China, it signals the need for policy reforms to retain foreign investment and bolster indigenous capabilities. Without adaptation, the economy risks prolonged stagnation in its quest for technological sovereignty, with spillover effects on global supply chains already strained by these shifts.