Can China Build Its Own Semiconductor Industry?

The United States is tightening export restrictions on semiconductor-related technology to China, and the situation is approaching that China may have to build its own semiconductor industry. However, Ben Thompson, who has worked at Microsoft and WordPress's parent company Automattic, explains that building the semiconductor industry is not so easy.

Chips and China – Stratechery by Ben Thompson

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On October 7, 2022, the U.S. Department of Commerce's Bureau of Industry and Security released an interim final rule that strengthens export control rules for semiconductor-related products, primarily targeting China. This is based on concerns that China will develop weapons and decipher codes using supercomputers and AI, and already China's semiconductor foundry SMIC has made products comparable to Taiwan's TSMC chips. It is pointed out that

The United States is cracking down on semiconductor exports to China due to the suspicion that ``China will develop weapons and decipher code using AI and supercomputers''-GIGAZINE

However, Thompson believes that just because there is a foundry like SMIC, it will be a very difficult task to create a scaled-down version of the world's semiconductor industry in China.

Even if SMIC takes over the role of TSMC, it is necessary to build the entire semiconductor supply chain, including ASML, a semiconductor exposure equipment manufacturer, Lam Research and Applied Materials, a semiconductor manufacturing equipment manufacturer, and Tokyo Electron. It will also lose the benefits it has enjoyed over the past decade through partnerships with foreign manufacturers.

On the other hand, China has three big advantages, Thompson said.

The first point is that it is easier to follow an existing path than to open up a new one. The extreme ultraviolet lithography (EUV) equipment necessary for manufacturing state-of-the-art semiconductors is almost monopolized by the Dutch semiconductor exposure equipment manufacturer ASML , and it is not manufactured in China and imports are restricted, but ' We know that we can build an EUV device.'

The second point is that we are already benefiting from technology sharing. SMIC has succeeded in manufacturing 7 nm chips using ASML's immersion exposure machine, and Shanghai Micro Electronics Equipment (SEEE) is developing its own immersion exposure machine. However, it is said that there is a problem with the yield.

And the third point is that the funds can be used as much as possible, and the motivation for realization is infinite. Money is not omnipotent, and just because you spend money doesn't mean you can make a high-speed chip. However, if it is to make a chip for military use, it will turn a blind eye to some yield problems.

In addition, China continues to make more basic chips with older technology, resulting in a 9% share of the global market for low-cost chips. For example, it is expected to have a share of over 35% for chips over 45nm and close to 30% for chips from 28nm to 45nm. And these chips still make up half of the total volume in the industry.

If China succeeds in building such a semiconductor industry, it will no longer have to rely on Taiwanese manufacturer TSMC, which will in fact increase the incentive to target it.

Thompson said he sees no possibility of a conflict between China and the United States, but said the level of concern has increased considerably.

By the way, the Biden administration in the United States regards leaving semiconductor manufacturing to the Asian region as a security risk, and the government is issuing a large amount of subsidies to promote the domestic return of the industry. However, there is a shortage of engineers to realize it.

Also, TSMC is by no means in a stable position in the industry, and it is reported that it is working on further miniaturization of chips.

in Hardware, Posted by logc_nt