Chinese semiconductor industry

hvpc said:

I think you misunderstood my point.

You only get as many tools as you spend. SMIC only spending $5B in 2022 and did not indicate they will increase it by much in subsequent years...hence the analysis that it will take time until they fill all their fabs.

And in terms of accounting, they are a publicly traded company and have to follow standard international accounting rules. Any funding from the government are logged in a very specific way in the financial reports.

We know SMIC gets plenty of support from government otherwise they would to be able to spend more than their profit these past few years.

Again, the focus here is that SMIC, either because the WFE suppliers could not allocate them enough tools or they are investing at a particular pace, are not spending $15-20 billion a year to support the theory that all fabs will be filled by 2024.

I recommend you read through SMIC's annual reports if you haven't already. You'll find lots of concrete datapoint to use in your assessment, which is much accurate than making speculations.

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tokenanalyst said:

A lot of the increase in demand of SMIC is due the desire of Chinese companies to localize their chip supply chain, which is mostly for geopolitical reasons not just demand, every single rumor of more restriction will likely push for more localization.

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tokenanalyst said:

For 28nm+ SMIC could allocate tools from domestic players like NAURA, AMEC, Piotech and so on. Apart from international suppliers.

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tokenanalyst said:

Sadly we don't have a say on that, but for central banks is either uncontrolled inflation or economic growth, the reality is that inflation eat through the middle class like hot knife in butter. If central bankers would have acted sooner to control the market bubble that themselves created they won't be now between a rock and hard place.

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PopularScience said:

SMEE planned to build 20 DUVs this year. I think this have been delayed.

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hvpc said:

But bottleneck is not with the process equipment but with the scanners. SMEE still do not have scanners to support 28nm.

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tokenanalyst said:

Maybe, but then everybody is f*cked because the industry let one supplier to have a virtual monopoly on those tools.

For now Chinese made tools are in the testing-developing phase trying to reach decent performance and usability so ASML accustom operators don't cry every ten seconds. Dual wafer-stage dry and wet tools will be mass produced soon. The problem is maybe that the first wet tools are going to sanctioned companies while dry tools are going the others. Chinese made dry tools could partially reduce the ASML pressure on the allocation time for their immersion tools.
The other option is to get those tools from Nikon but looking their sale numbers looks like they are in life support and is unlikely that they have built manufacturing capacity to serve the Chinese market.​

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tokenanalyst said:

Interesting, looks like they are few companies making this kind of equipment,yet to see how advance they are or how independent they are to geopolitical trouble. Looks like is an area that still need some work to do.

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FairAndUnbiased said:

Nikon has been trying to win Chinese customers since 2020, seemingly with low success.

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Not sure what their problem is.

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sunnymaxi said:

https://twitter.com/i/web/status/1575514789417259010

Hope Taiwanese read this to know what the future holds for them.

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caudaceus said:

Actually I wonder how did you find Chinese companies for specific product like this?

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hvpc said:

Bro, since I'm in an analyzing/sharing mood, let me continue.

Let's look at another key bottleneck of expansion speed: availability of scanners . Fab expansion starts with scanners. No one goes out to buy more process equipment unless they could secure enough scanners. So let's look at how many scanners would be required.

If I remember correctly from when I'm in charge of scanners at a foundry, 28nm node flow typically takes about 50 litho steps, and 7nm about 75 litho steps (or # of reticles). Let's append this info to the table I shared previously:

SMIC SN1	35K	14nm/7nm	$12B	~25 ASML scanners
SMIC SN2	35K	14nm/7nm	$12B	~25 ASML scanners
SMIC Beijing	100K	28nm	$7.7B	~45 ASML scanners
SMIC Linggang	100K	28nm	$8.9B	~45 ASML scanners
SMIC Tianjing	100K	28nm	$7.5B	~45 ASML scanners
SMIC Shenzen	40K	28nm	$2.35B	~18 ASML scanners
Total	410K		$50.45B	~203 scanners

So, ~203 scanners is what SMIC needs.

- ASML ships 23systems/Q ==> 92systems/year
- assumes SMIC gets 1/3 of all systems (leaving 2/3 of systems to be divvy up between CXMT, YMTC, Huahong, and others): ~30systems for SMIC per year.
- This then means it'll take SMIC ~6 and half years to fill up fabs. This takes us to middle of 2027, which means 2028 to see all 410K wpm wafer output realized.

Assumming 6.5years to ramp:
- 2022: $5B CAPEx
- 2023 through 2026: $7B
- 2027: $3.5B CAPEx

Upon looking at this result, $7B/year which is 40% increase over 2022 CAPEx would seem plausible. However, this would also mean a 40% increase in scanners. Given ASML's announced supply constraint, I'm less confident if ASML could increase number of scanners they sell to SMIC by 40%.

And of course, this would mean, previous assumption of 30scanners/year is unrealistic. If $7B = ~30scanners. Then $5B in 2022 would mean SMIC purchased ~24 scanners in 2022.

Anyhow, analysis like this is some times iterative; many combinations. So let's adjust our original assumptions to come up with two possible scenarios:

1. If you are bullish on SMIC's willingness to spend and ASML capable to supply 30systems/year, then let's just call it 6.5years (from top of 2022). This means all SMIC 300mm fabs fully ramped before end of 2027.

2. If you are less bullish on ASML's capability to ship tools, let's call it 24systems/year @ $5B CAPEx spent by SMIC, then it'll be 8years to fill the fabs ==> SMIC 300mm fabs fully filled by end of 2029.

I'll stop right here. Y'all can decide for yourself if SMIC could pull off the entire capacity expansion faster than 6.5 years or slower than 8years. But, be mindful of the implication with the annual CAPEx and #scanners available that comes with whatever scenarios you chose.

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