News on China's scientific and technological development.

Tam said:

Some interesting points here.

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Some highlights:

AMEC’s etch system is used in TSMC’s 5nm fab and is developing a high aspect ratio etcher and staircase etcher for 128-layer 3D NAND manufacturing at YMTC. Other customers include SMIC, Huahong, and Huali.

Whereas NAURA sold 8 etch systems and 6 CVD and ALD deposition systems to Chinese semiconductor companies, the company sold 34 furnaces in 2019 as well as 16 cleaning systems.

What about technology capabilities of Chinese equipment companies? According to my analysis, NAURA has the capabilities of producing chips at 5nm, comparable to those of AMAT and peers. NAURA is making equipment with 14nm capabilities but is developing etchers and deposition equipment for 7nm and 5nm nodes.

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I take it that China has some room to move in regards to chip development?

WTAN said:

Chinese Government has finally decided to invest in the Semiconductor Industry in a big way. It will no longer depend on American technologies.

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Illegal stated-led policies, funded with subsidies that unfairly distort the playing field on a global scale. This is beyond WTO, US needs to take matter into her own hand to ensure the Chinese regime toe the line and respect free market. Lastly, do not attempt to bypass the intended effect of US sanction that is in line with a rule-based world order.
- Speaking in place of Pompeo

Tam said:

FPGA is only good for a new product or one that exists in small quantities. The problem of an FPGA is that it is over engineered. It is like this collection of different knives and screwdriver heads in a chain that you use as a tool, but you only need a box cutter for the job. When you have identified and isolated the job clearly and know what you want to do, its better to do a dedicated ASIC, use only a design with a specific purpose and mission. Its smaller, cheaper, uses less power, more reliable, than using a chip with the vast majority of its transistors unused, just consuming power, making more heat, and eventually break down faster.

You don't need cutting edge FPGA with say, AI features on a base station. Its an utter waste of money. In fact I am not sure what you need an FPGA with AI features for. It just seems these companies need to make money by creating solutions to questions no one asks.

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If Huawei went by the FPGA route, it would only be for an interim solution, for like 1 year, after that lines will have improved to make SoC again,, or go via Samsung line (by then it's no longer too shocking to see Samsung helping China lol).

On the cost, this is stated by Nokia,
"Nokia executives say the price difference for high-volume products was typically between 5% to 15%. Nokia products using the FPGA chip also used more energy, a downside for wireless carriers trying to cut down power consumption."

Power consumption is the problem, but China or an overseas operator(s) could be compensated for higher power cost..?

hullopilllw said:

Illegal stated-led policies, funded with subsidies that unfairly distort the playing field on a global scale. This is beyond WTO, US needs to take matter into her own hand to ensure the Chinese regime toe the line and respect free market. Lastly, do not attempt to bypass the intended effect of US sanction that is in line with a rule-based world order.
- Speaking in place of Pompeo

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Yeah, considering that the USA government is subsidizing there companies ( to prevent them from going bankrupt of course due to Trump and Pompeo actions), they really made things worse for themselves.

machupicu said:

If Huawei went by the FPGA route, it would only be for an interim solution, for like 1 year, after that lines will have improved to make SoC again,, or go via Samsung line (by then it's no longer too shocking to see Samsung helping China lol).

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No, it will have to be much less, confined to a few prototypes and testing base stations in the field. Not in any way dealing with mass production. FPGA is only good for prototyping and when you are not sure of your design, need to make continual adjustments. But if you are definitive in your design and has frozen it, you should just go ASIC if you are anticipating a large production demand.

On the cost, this is stated by Nokia,
"Nokia executives say the price difference for high-volume products was typically between 5% to 15%. Nokia products using the FPGA chip also used more energy, a downside for wireless carriers trying to cut down power consumption."

Power consumption is the problem, but China or an overseas operator(s) could be compensated for higher power cost..?

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Click to expand...

Nokia faces diminishing market share so they don't make as much base stations, plus they are unsure or not as confident of their technological designs. That makes a case for FPGA.

AssassinsMace said:

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This is an example why the US loses. If you're not able to make it commercially viable, it goes no where. Everything the US does is going to cost them more to do.

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will this be considered a national security issue, so the TV will be banned in the USA?

It was mentioned that China will spend about 1.4 Trillion Yuan for 5G base stations from 2021-25 (5 millions base station) -- not to be confused with $1.4 trillion Dollars for hi-tech projects (AI, robotics, 5G, etc) to 2025.

1.4 trillions yuan is about 200 billions $, or abt $40,000 per base station (total 5M).

This is consistent with this info,

"How much does it cost to build a 5G base station?

...According to this rough calculation, the value of a base station of China Mobile should be about 500,000 yuan for a 5G base station. The value of a base station of China Unicom should be 200,000 for a base station. And China Telecom needs 225,000 yuan to build a base station.

In their eagerness to choke off the flow of semi equipment, They will shoot themselves in the foot because with exception of lithograph machine Chinese semiconductor equipment can supply Chinese FAB with domestic equipment. The Chinese market for th e like of AM. LAM, KLA tensor will dry up. Worse now that all the foreign personnel left who is watching their equipment left in the FAB when domestic equipment personnel now can maintain and inspect their equipment ? Re anyone?

China Equipment Suppliers' Threats For Applied Materials And Peers
Sep. 2, 2020 5:02 PMASML, ASMLF, HXSCL
Summary

• Recent U.S. Department of Commerce restrictions threaten exports of foreign semiconductor equipment suppliers.
• The uncertainty is creating significant confusion among equipment suppliers, not just in the U.S., but in Japan, Europe, and elsewhere.
• Current Chinese equipment companies have the capability of processing semiconductor chips down to the state-of-the-art 5nm node.
• Besides economic ad political ramifications, restrictions could escalate IP theft as Chinese manufacturers reverse engineer superior foreign equipment.
• Applied Materials will be most impacted by export restrictions of all foreign suppliers, and restrictions will halt the acquisition of Hitachi Kokusai Electric.

The trade war between the U.S. and China has been multifaceted. What started as a strategy to reduce the deficit of bilateral trade, it has morphed into a battle over unfair trade practices for technology, IP (intellectual property) theft, and prevention in the growth of China’s military strength.
On May 16, the U.S. Commerce Department placed China’s Huawei on an "entity list" on grounds of national security, a move that curbs its access to US-made components it needs for its equipment. The move banned the use of American technology to make chips for Huawei, meaning that Taiwan foundry TSMC (), which uses American fab equipment, could no longer make Kirin smartphone chips for Huawei. The move prompted me to write the Seeking Alpha article entitled “” on July 17, 2020.

On Aug. 17, commerce announced it will expand restrictions designed to limit Huawei's access to chips made using American software and equipment. Thus, the U.S. is now considering new restrictions on exports of semiconductor manufacturing equipment and associated software tools, lasers, sensors, and other technology to prevent them from falling into the hands of U.S. adversaries like China.
The U.S. Commerce Department said in a posting on a government website a week later it was seeking public input on how to define new technologies as it determines “whether there are specific foundational technologies that warrant more restrictive controls” in the export process.

The uncertainty is creating significant confusion among equipment suppliers, because although it applies to U.S. companies, equipment companies from Europe and Japan also may be impacted.
This article discusses the status of the Chinese equipment industry and the ramifications on China’s semiconductor industry if foreign equipment is blocked.
The Global Semiconductor Equipment Industry
Without semiconductor equipment like Applied Materials (), Lam Research (), KLA (), Tokyo Electron () and ASML (), none of the world's leading chip manufacturers would be able to produce advanced ICs. China currently has no noteworthy home-grown equipment companies that can match the technology offerings of these companies.
Chart 1 shows the market shares of the top five equipment suppliers from 2013 through 2019. These five companies represented 65% of the global equipment market of $59.5 billion.
There are several features in Chart 1 that I want to elaborate:

1. I show two lines for AMAT (black and gray). In general, except for growth in just one year (2016), market share has dropped for five or six years. This may sound confusing and why is it important? In 2019 AMAT took $331 million from 2018 revenues and brought them into 2019. The company called it “REPROFILING REVENUE” - a change in accounting methods. Without reprofiling, 2019 revenues would be lower than 2018 (black line). However, with reprofiling, the $331 million deducted from 2018 and put into 2019 caused revenue to increase (gray line).
2. ASML (yellow line) became the largest supplier of equipment in 2019, knocking AMAT from the No. 1 position for the first time in more than 20 years.
3. LRCX has dropped in market share for two successive years.
4. Japan’s TEL has shown growth in most years on the strength of its dominance in non-tube low pressure CVD (LPCVD).
5. KLA’s share increased to 6.1% on the strength of the company’s acquisition of Orbotech. Otherwise, the company has more than a 50% share in the metrology/inspection equipment sector.

Chart 1

China Semiconductor Equipment Industry
In 2019, there were $13.5 billion in imports of foreign equipment, but home-grown equipment sales were less than $250 million in 2019 from leading companies AMEC and NAURA, and others including ACM Research, Mattson, and Shenyang Piotech, according to our marketing report entitled “Global Semiconductor Equipment: Markets, Market Shares, Market Forecasts.”
Financial Capabilities
Table 1 shows the various types of equipment manufactured by Chinese suppliers and comparing them to the top foreign supplier and that supplier's market share.
Note that (1) there are few Chinese companies for each type of equipment and (2) the top foreign equipment supplier has significant market shares, a deep moat for Chinese suppliers.


As for customers:

• AMEC’s etch system is used in TSMC’s 5nm fab and is developing a high aspect ratio etcher and staircase etcher for 128-layer 3D NAND manufacturing at YMTC. Other customers include SMIC, Huahong, and Huali.
• NAURA has a large product offering, and its customers consist of SMIC, Hua Hong, YMTC, and GTA Semiconductors.
• Whereas NAURA sold 8 etch systems and 6 CVD and ALD deposition systems to Chinese semiconductor companies, the company sold 34 furnaces in 2019 as well as 16 cleaning systems.
• Shenyang Piotech received orders for 4 PECVD (for SiN, SiO2) systems from YMTC, and also is receiving repeat orders from Hua Hong and SMIC.
• ACMR competes in the cleaning system sector. They have been installed by YMTC and Hua Hong/Huali as well as SK Hynix (
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  ).

Technical Capabilities
What about technology capabilities of Chinese equipment companies? According to my analysis, NAURA has the capabilities of producing chips at 5nm, comparable to those of AMAT and peers. NAURA is making equipment with 14nm capabilities but is developing etchers and deposition equipment for 7nm and 5nm nodes.
It’s important to recognize three things:

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   . For example, Intel’s 10nm is slightly denser than TSMC’s 7nm for SRAM. But TSMC’s 7nm is actually denser than Intel for logic.
2. Although Chinese suppliers have 5nm capability, there are questions as to whether even the 7nm node can be reached without EUV, which I discussed in my SA article mentioned above on SMIC
3. Just 25% of China’s chip capacity is <20nm, technology about six years old (see Chart 4), according to our report entitled “Mainland China’s Semiconductor and Equipment Markets: Analysis and Manufacturing Trends.” Table 1 shows that in Q1 2020, just 1.3% of SMIC’s revenues were from chips made at 14nm.

(cont)

Investor Takeaway
According to , SMIC’s other co-CEO:

“We see many key domestic chip equipment and materials makers have also gone public, and received massive financial support from the local capital market. We think the future is bright, even though the scale of these companies is still small compared with existing market leaders. What we will do now is work with them and also test these local suppliers, but we don’t expect these followers could replace any of the leading suppliers soon.”

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The key to his comments was the last sentence. Chart 2 sums up the huge lead foreign equipment have over native Chinese companies. In 2019, Chinese suppliers sold just $200 million worth of equipment compared to imported equipment from foreign suppliers valued at $13.3 billion.


Chart 2

Why? Although Chinese-made equipment has the ability to be used in the fabrication of state-of-the-art 5nm chips, there are numerous other factors that semiconductor manufacturers use to evaluate a supplier. We don't know about

• Reliability
• Uptime
• Price/performance ratio
• Mean time between failures (MTBF)
• Equipment support
• Limited breadth of equipment offerings within a sector

Semiconductor manufacturers typically take 9-12 months to evaluate a piece of equipment and make decisions on a "best-of-breed basis." However, I have learned from my sources that the Chinese government is demanding that a portion of equipment used in a fab must be Chinese made.
This begs the question. If Chinese made equipment is sitting side-by-side to a foreign-made system, how difficult would it be for Chinese equipment engineers to keep their eyes and ears open to discover features of the foreign equipment that could be implemented into their own. In other words, IP theft.

On the other side of the coin, if foreign equipment companies were blocked from shipping more equipment, would it open the flood gates for more IP theft because foreign engineers may not be permitted by the Commerce Department to monitor equipment? For example, in October of 2018, Commerce effectively shut down Chinese semiconductor firm Fujian Jinhua—cutting it off from U.S. suppliers, including suppliers of semiconductor-making machines. The firm had stolen U.S. memory chip maker Micron’s (NASDAQ:

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) technology, which I wrote about in a Nov. 6, 2018 Seeking Alpha article entitled “

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.”
It was my understanding that foreign equipment engineers picked up their tools and exited the building. What happened to that equipment? Were they reverse engineered in another example of IP theft?
Applied Materials will be most impacted by export restrictions of all foreign suppliers for several reasons:

• The company supplies more types of equipment to China and has a larger installed base of equipment than any foreign peer. If we look at Table 1, AMAT makes every type of equipment except for lithography and resist processing.
• AMAT makes more variations of equipment within a sector than peers. For example, in the CVD sector, AMAT offers 12 different types of equipment compared to just 5 for LRCX and 4 for TEL. In the PVD (sputtering) sector, AMAT has 16 different variations of equipment while China's NAURA has just 6.
• Commerce restrictions will halt AMAT's acquisition of Hitachi Kokusai Electric. Remember that the Chinese regulators still need to approve the acquisition and so far they have refused. You can read more about this in my May 27, 2020 Seeking Alpha article entitled "
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  ."

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Hendrik_2000 said:

In their eagerness to choke off the flow of semi equipment, They will shoot themselves in the foot because with exception of lithograph machine Chinese semiconductor equipment can supply Chinese FAB with domestic equipment. The Chinese market for th e like of AM. LAM, KLA tensor will dry up. Worse now that all the foreign personnel left who is watching their equipment left in the FAB when domestic equipment personnel now can maintain and inspect their equipment ? Re anyone?

Click to expand...

Yup, agree totally with what you are saying.

This tech war was unquestionably good for China.

Anyone who thinks otherwise, just does not understand the world.

People just get tired of arguing about it. One side is doing the other side a favour in that argument, by dispensing knowledge of the world.

That brings us to and highlights the same point, with regards to the dummies that reside in the Trump administration. Obviously, they do not understand the world either.

Perhaps it is all cowboys and Indians to them?

Maybe.

As for who will be watching over the fab equipment, probably the chip police.

Sort of the like the thought police, but this time it is a real US government agency created by Pompeo.