Chinese semiconductor industry

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However, in recent years the US has started to fear change in this sector, and become more anxious that China may emerge as a global producer of high-end semiconductors, overturning the established market order America has built and, in the process, developing tech with the potential to gut its leading industries.

It now appears that globalisation is being actively rolled back in this new environment of geopolitical competition, with US foreign policy weaponising the semiconductor industry and supply chain, in a way that has never been done before, in order to effectively assert political sovereignty over foreign magnates it does not own and to make them do its bidding. This is all aimed at containing China.

The goal is to effectively embargo the export of high-end semiconductor parts to China’s strategic industries in order hold back its technological development, forcing Beijing to pursue a breakneck race to self-sufficiency.

This technological war is being pursued by a number of means. First and most frequently, hundreds of Chinese companies have been added to the Entity List maintained by the US Department of Commerce, which bans US companies from exporting sensitive components to them without a government licence. While compromises can be made – as was reported last week – these tend to be for lower-end non-critical technologies, such as automobile chips, or 4G ones instead of 5G.

Huawei has been subjected to a more rigorous interpretation of this in the form of the ‘Direct Foreign Product Rule.’ This means that foreign semiconductor companies are not allowed to use direct US patents in exporting to the company – it doesn’t matter where or who they are.

This is a long-arm act of jurisdiction which has seen the company cut off completely from the supply of foreign semiconductors, illustrating America’s power in this field. But the US has gone even further than this, weaponising patents it owns in various semiconductor and lithography companies to block sales to China when it has no business doing so.

When a South Korean chip company called Magnachip was sold to a Chinese firm earlier this year, the US committee on foreign investment blocked the deal. The same happened when Dutch firm ASML sold an ultraviolet lithography machine to China – the US government prevented it. Even if only 10% of a product uses US origin tools, then Washington claims for itself the legal right to kill it, and this is why foreign semiconductor firms, including TSMC and Samsung, have had to invest in chip plants in the US, or in other countries of strategic importance, like Japan.

What we are seeing here is how the state is wielding governmental power over an industry which is now more political than it is commercial. By forcing TSMC and others to hand over data, the US wants to exert even greater control over their business. The irony of this is that the American government has demanded that other countries ban Chinese technology firms on unfounded accusations they do the same thing. TSMC has been hollowed out into a puppet company which answers to Washington and not Taipei, as the US pulls strings over an entire supply chain.

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China now faces the mammoth task of investing in an entire semiconductor supply chain of its own. And this isn’t to dominate world markets – it’s necessary for its own economic development. China’s own demand for semiconductors is swelling and it is the largest market in the world, but that alone constitutes an enormous strategic weakness which the US government can use to exert leverage over it.

As a result, Beijing is investing hundreds of billions in research and development, as well as expanding capacity in the race to make chips of its own. Ultimately, America’s weaponization of the supply chain means China has to create a new ‘pyramid,’ one which is not built on someone else’s foundations, but on its own. It is making some progress building from the bottom in lower nodes, but much more is needed.

In a world of geopolitical competition, the US is effectively exerting control over an entire industry, with disastrous consequences for everyone involved, breaking up a global market into politicised blocs. And Taiwan has found this out to its cost. Having placed all its bets on America for support, in the end it has found it doesn’t even have sovereignty over its most important economic asset

Another words, the US is finished.

dfrtyhgj said:

Another words, the US is finished.

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The United States is not finished, maybe a couple of those big companies will not be as big or profitable, which means those US companies could be finished.

The United States is weird. It is like they have no knowledge of the world. That is odd, because America invented a lot of these technologies.

The semiconductor industry, from the drawings to the final product the chip, is one of the most complicated industry supply chains in the world. Very few industries can match that complexity.

The only other ones I can think of are:-
- building advanced fighter aircraft
- space exploration
- nuclear industry

Guess what? China has done alright with those industries. They made the J-20. They landed on Mars, on their first shot, in one of the most complicated space missions ever attempted. They build nuclear power plants and weapon platforms.

China never got to the most advanced nodes of IC manufacturing because it was just cheaper to buy it. The other stuff was all related to the military. High end chips are more of a commercial matter than military matter. The chip war is real, but this is not a real war. It is just about money, and who is going to make that money.

China was able to master the complexity of other such supply chains. The Americans do not believe the Chinese can master IC, but they have nothing to base that on, other than their own prejudices.

The American competitive position is weakening in IC. The Chinese know it, but the Americans do not.

we have to ramp up tension to make it political unfeasible for the Americans to revert those bans.

Maybe the next Huawei phone should be name Huawei 911 Osama, Twin Tower edition or something like that.

horse said:

The United States is not finished, maybe a couple of those big companies will not be as big or profitable, which means those US companies could be finished.

The United States is weird. It is like they have no knowledge of the world. That is odd, because America invented a lot of these technologies.

The semiconductor industry, from the drawings to the final product the chip, is one of the most complicated industry supply chains in the world. Very few industries can match that complexity.

The only other ones I can think of are:-
- building advanced fighter aircraft
- space exploration
- nuclear industry

Guess what? China has done alright with those industries. They made the J-20. They landed on Mars, on their first shot, in one of the most complicated space missions ever attempted. They build nuclear power plants and weapon platforms.

China never got to the most advanced nodes of IC manufacturing because it was just cheaper to buy it. The other stuff was all related to the military. High end chips are more of a commercial matter than military matter. The chip war is real, but this is not a real war. It is just about money, and who is going to make that money.

China was able to master the complexity of other such supply chains. The Americans do not believe the Chinese can master IC, but they have nothing to base that on, other than their own prejudices.

The American competitive position is weakening in IC. The Chinese know it, but the Americans do not.

Click to expand...

The US has calculated that semiconductor chokehold on China is the one thing that will slow it down the most... When Fort Knox was empty of gold and Brentwood came to end in early 70s that would have been the end of dollar as reserve currency but the US having all those military bases and aircraft carriers came up with the so called petrodollar hegemony... American cannot really directly tax the entire world, but the whole world needs energy in the form of oil and the Middle East had the most of it, so US hatched up the plan to offer the OPEC "protection" in exchange for their agreement to export only by accepting USD. This meant the rest of the world had to by extension use the USD as reserve currency and thereby allowing the US to harvest and usurp the wealth of the rest of the world for the last 50 years...those that didn't play this game got Saddam'd and Gadhafi'd

Now oil age is over one way or another its coming to end soon... US hatch up new plan, digital OPEC will be the semiconductor sanctions, long arm, and eventually a total chip ban/embargo against China...

Who here three years ago would have thought that TSMC was going to be forced to drop Huawei and then kneel in front the US Empire by sharing its client secrets with the US, by being forced to technology transfer to America and building up fabs in Arizona etc... Soon the US will force TSMC to give priority to the US companies (GM, Ford, Intel, etc) and basically ban all business with Chinese firms.... (DJI, Xaomi, etc etc)

China spent more money buying chips than it did oil... so yes this is how the US plans to keep its dollar reserve status for the next say 20 years by tying it into the chip industry and basically in the age of the 4th industrial revolution and Internet of Things, everything needs a chip (5nm or less) and by controlling this semiconductor chokepoint the US can essentially force China and the rest of the world to keep propping it up for another 2 or 3 decades just like how the US used oil as economic hostage against the economies of the world for the last 50 years....

You guys read the 700 page report that Google Chairman Eric Schmidt wrote to US congress right? He details how US can stay ahead of China technologically and economically by doing whatever it takes to deny China access to <14nm, and this is the critical threshold (anything like say 7nm and lower) where AI is really able to takeoff and shine...

AI is the final frontier, the nation that masters and dominates AI/AGI/etc first will get the decisive edge and most likely maintain it for the rest of the century... Solving deep AI is the penultimate solution to all other problems of the world, with that we can use it to solve for fusion, the climate situation, future pandemics, etc etc.... US is using all its leverages to make sure China never catches up in semiconductors so that it will also by extension be hopelessly behind in the application and deployment of future advanced AI and other advanced technologies...

From Unitary to Multi Polar world in geopolitics the same thing happen in Semiconductors with China and the West having their owned separate system and here I think the US had made a critical error in judgement, instead of protecting the institution which their forefathers before them had created and crafted, the present generation is tearing it up and making a mess of things. I think their ancestor is rolling over in their graves and cursing their successor for misusing its inheritance...lol

"Never interrupt your enemy when they're making mistake" a famous French Emperor once said and he follow it up with another famous quote which reverberated today “Let China Sleep, for when she wakes, she will shake the world” Here the present generation of Western leaders need to take heed and study their owned history. Cause the current geopolitical upheaval is the consequences of their insecurity , hubris and unwillingness to accept reality.

visitor123 said:

we have to ramp up tension to make it political unfeasible for the Americans to revert those bans.

Maybe the next Huawei phone should be name Huawei 911 Osama, Twin Tower edition or something like that.

Click to expand...

Nah, just calling it Honor was enough to trigger them since they have no honor.

From Nikkei and apologies if somebody had posted it before since the article is published last week.

Semiconductor tech trends favor China​

With miniaturization at a wall, upstarts gain edge in race for faster chips

EUV lithography technology is so difficult and costly to develop that only one lithography machine maker still exists, ASML of the Netherlands. (Photo courtesy of ASML).
KEN KOYANAGI, Nikkei Asia Editor-at-largeOctober 21, 2020 17:54 JST
TOKYO -- Yukio Sakamoto, a 73-year-old Japanese chipmaking business veteran, last fall took a senior vice president position at Tsinghua Unigroup, a leading Chinese high-tech conglomerate affiliated with the renowned Tsinghua University. His role is to oversee the launching of a DRAM memory-chip manufacturing business.
It looked like a bold decision and perhaps an ill-conceived move considering the U.S.-China technology rivalry was growing nastier. The U.S. continues to throw one punch after another at Chinese semiconductor makers Huawei Technology and Semiconductor Manufacturing International Corp., known as SMIC, making the idea of launching a new chipmaking business in China appear daunting.
But Sakamoto remains optimistic.

"We are living in a world where latecomers have a better chance to catch up with incumbent leaders," he told Nikkei Asia, "because semiconductor technology is progressing more slowly today as the smallness of transistors is approaching limits in terms of physics and optics."
He is not talking about the near-term conditions for building a new memory-chip factory, which are far from ideal. It is uncertain how long Chinese companies will be allowed to import U.S. chipmaking equipment and chip-designing software, though as of Oct. 19 Unigroup has not been named as a restriction target by any U.S. government agency.
Rather, Sakamoto is talking about the longer-term prospects for China to develop its own silicon wafer fabrication skills and technological capabilities for domestically supplying chipmaking materials, equipment and software.
History tells us that a technology paradigm shift can create opportunities for emerging players, and Sakamoto is seeing this unfold in the semiconductor sector today.
Rise of 3D tech
Moore's Law remains on the books. It says that the number of transistors in an integrated-circuit chip doubles every 18 to 24 months. It was foretold by Intel co-founder Gordon Moore in the 1960s. Until the mid-2000s, the industry kept pace with the law by shrinking the size of transistors and circuits built on a surface of a silicon wafer die.
Huawei Technology and other Chinese companies are developing lithography machines that will render U.S. export restrictions meaningless. © Reuters
But miniaturization hit a wall about 15 years ago. The size of transistors had shrunk to about 30 nanometers (30 billionths of a meter), measured by the width of a central electrode called a "gate." Therefore the speed of miniaturization slowed.
Chipmakers have nonetheless kept reducing the numbers labeling their latest generations of chips, going from 32nm to 22nm, to 14nm and to 10nm. But these numbers stopped representing actual transistor-gate sizes after the mid-2000s, becoming something like brand labels.
For example, the actual gate length of a transistor in a "7nm" logic chip made last year by Taiwan Semiconductor Manufacturing Corp., known as TSMC, was somewhere around 18 nm, according to University of Tokyo professor Toshiro Hiramoto. It is a stark deviation from the "32 nm" chips, whose gate length was actually 32 nm or smaller.
Because of the increased difficulty and rising cost of miniaturization, chipmakers are turning to so-called three-dimension technologies that make use of the space above the conventional wafer surface to load more transistors onto a chip.
For example, the most advanced NAND flash memory chip, commonly used for data and image storage in smartphones and personal computers, is structured in as many as 96 to 128 layers of integrated circuits stacked on top of the bottom wafer die.
While the layers increase and the whole chip thickens, transistor miniaturization has reversed itself in the world of flash memory.
Today, the typical transistor size of a flash chip is somewhere in the 22-32 nm range, larger than the 14-nm transistors used in flash memories a few years ago, according to industry experts.
Such a shift of importance from miniaturization to 3D technologies is likely to affect the industry's stance about the most difficult part of the chipmaking process, photolithography.
Photolithography is a process in which a circuit plan is imprinted on the photosensitized surface of a silicon wafer by beaming light toward the wafer through a glass plate called a photo mask on which the circuit plan images are drawn. This is like the traditional photo development process, where an image captured on transparent film is imprinted on paper by projecting light through the negative film toward the photosensitized paper.
As circuits further miniaturize, the process needs shorter-wave lights for better resolution. The most-advanced miniaturization requires invisible light of the extreme ultraviolet or EUV spectrum range.
Liberation from EUV
EUV lithography technology is so difficult and costly to develop that all but one lithography machine company, ASML of the Netherlands, have abandoned it.
ASML, bequeathed a monopoly, is believed to be selling one EUV lithography machine at a price range of $120 million to $170 million. When a chipmaker makes a deal with ASML, it buys a machine that is applicable only to tiny parts of the entire chip fabrication process and which brings about only modest miniaturization effects, industry experts say.
EUV machines today are used only for logic chips -- like PC microprocessors, system-on-chips in a smartphone and graphics processors for games and artificial-intelligence data crunching. Because of the complexity of circuit composition, logic chips have not been able to fully deploy 3D layer technologies.
When they do, the cost and difficulty of deploying EUV lithography may become less justifiable.
Flash-memory makers have actually skipped EUV. And "DRAM memories are unlikely to require EUV as far as I can see," predicts Sakamoto, who has run DRAM businesses at various companies including Texas Instruments, United Microelectronics (UMC) of Taiwan and Elpida Memory of Japan, which today is Micron Technology's Japanese plant.
If a chipmaking plant starts using EUV lithography, it requires many other processes also to be optimized for EUV lithography, meaning massive capital investments for various kinds of advanced equipment. The more advanced the equipment, the fewer suppliers there are, making U.S. bans more effective.
But if one can skip EUV lithography, the available choices for chipmaking equipment increases.
There are more choices for the non-EUV lithography process than EUV. Japan's Nikon and Canon make non-EUV lithography machines. So far, their shipments to Chinese chipmakers have not been blocked by the U.S.

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Some Chinese companies, including Huawei Technology itself, have been working hard to develop their own lithography machines. There are reports of successes in making prototypes of a lithography machine using deep-ultraviolet argon-fluoride excimer-laser immersion technology, the most advanced among non-EUV lithography technologies.
In addition, Yangtze Memory, an affiliate of Unigroup, announced in June that it had succeeded in developing a manufacturing capability for 128-layered 3D flash memory chips and will start commercial production by the end of the year.
The U.S. seems to have focused on EUV in efforts to block China from obtaining advanced semiconductor technologies. It has been reported that the U.S. successfully persuaded the Dutch government to block ASML from selling EUV machines to SMIC. But, as Yangtze shows, China is accumulating know-how in 3D chipmaking skills, which will eventually be applicable to advanced logic chips and will help the country avoid dependency on EUV-based miniaturization.
Of course, there is a harsh reality that most of the non-lithography equipment items handling dozens of chipmaking-process stages are made almost exclusively by U.S. and Japanese companies. The thin-layer deposition process, critical in pursuing multilayer 3D chipmaking, is dominated by Applied Materials of the U.S. And surface inspectors of KLA-Tencor of the U.S. are indispensable in completing each such layer.
No matter whether 3D tech is involved, if access to U.S. equipment is blocked, it will disable any chip manufacturer in building or expanding its manufacturing capacity.
However, in the longer run, experts believe China is capable of enhancing its capabilities in all related sectors -- materials, optics, chemical, wafer-fabrication process control, surface inspecting, function testing and so on.
Toshiaki Ikoma, former president of Texas Instruments' Japanese subsidiary and former chief technology officer at Canon, was SMIC's chief technology officer in the mid-2000s. Based on his experience there, he believes China has a sufficient number of capable scientists and engineers to develop its own chipmaking equipment and chip-design software.
"Their national strategy to send many students to U.S. schools and companies and then repatriate them like sea turtles, which has been going on for decades, is bearing fruit," he told Nikkei.

Hideki Wakabayashi, a Tokyo University of Science professor, says developing the whole supply chain of chipmaking equipment and materials cannot be done quickly. But "there is a possibility for China to become a dominant country in the field in 10-20 years because of its abundance of talent in all science and engineering fields," he said.
And technology trends are a plus for latecomers like China. "New technologies such as new materials, 3D, advanced packaging, AI-assisted chip design and cloud-based manufacturing collaboration will all create new opportunities for emerging players," said Samuel Wang, research vice president at Gartner.
James Lewis, senior vice president at the Center for Strategic and International Studies in Washington reminds that a U.S. ban on satellite components to China led non-U.S. companies to become alternative suppliers. "Overly broad restrictions will harm the U.S. more than China," he warned on his blog in May, commenting on U.S. efforts to block China's access to semiconductor technologies.
Sakamoto said he had been impressed when he was chatting with a Chinese business leader earlier this year. "He told me that Chinese tech leaders are now grateful to Mr. Trump for helping them become resolutely determined to develop technologies on our own," Sakamoto said.
It may be true that the U.S. tech squeeze has crushed President Xi Jinping's public dream of China supplying 70% of its own semiconductor demand by 2025. In 2019, China fed 16% of its own demand, according to IC Insights. But the U.S. policy may be raising the longer-term probability of China realizing Xi's dream.
Additional reporting by Nikkei staff writer Masaya Sato.