Further from the sanctions and restrictions placed on the US-China trades by Former President Donald Trump. Biden's administration has set in motion more restrictions that prevent American chipmakers from selling their semiconductor to China. The information comes after some American Chipmakers such as NVIDIA found ways to have variants of their AI chip, the H800, in the Chinese market.
US Commerce Secretary Gina Raimondo stated that the updated rules would increase the effectiveness of their controls and further shut off pathways to evade their restrictions. She mentioned that these controls maintained their clear focus on military applications and confronted the threats to national security posed by the PRC government's military-civil fusion strategy.
The concerns cited are the potential threat posed by the advanced AI capabilities of the chips of the advanced semiconductor in the US, capable of supercomputing. These technologies have the potential to enhance the speed and precision of military decision-making, planning, and logistical operations. Additionally, they can find applications in cognitive electronic warfare, radar, signals intelligence, and jamming. However, when harnessed for supporting facial recognition surveillance systems, there arise concerns related to human rights violations and abuses.
The news however debilitating to the market are accelerating innovations and evolution of the chip technologies by the Chinese Chip designer, productions and foundries. As the US strengthens its stand on the punitive measure by severing China's supply chains, the demand within China grows exponentially.
The race to self-sufficiency is not one without its own limitations and huddles. The Chinese market has to move its own weight with most of the lithography companies refusing to work with them due to the sanctions.
The Chinese are therefore forced to make or try to make entire lithography processes, a range of semiconductor production equipment that meet the current demands and technologies. This in itself is a serious hold-up.
China's leading chip maker and lithography equipment maker is SMEE, Shanghai Micro Electronics Equipment. It was founded in 2002. Currently, the lithography equipment maker only produces lithography systems capable of i-line (280nm), KrF (110nm) and ArF dry (90nm) lithography systems. According to projections they are expected to produce their first 28nm capable immersion lithography systems by the end of the year.
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1. A worker watches Semiconductor processing for quality monitoring. (Image Courtesy of Getty Images)
Contrasting this to the world’s leading chip maker, Taiwan founded in 1987, the 90 nm process was first produced in 2004, and the 28nm in 2011. Thus, leaving SMEE and the Chinese chip technologies at least 12 years behind in the making of the 28nm process.
On the other hand, other chip makers such as the Semiconductor Manufacturing International Cooperation, SMIC, that utilize imported foreign equipment are only four years behind TSMC in the 7nm process. However, due to the newly imposed sanctions the Netherlands and Japan have effectively stopped the shipment of advanced DUV lithography systems to China. Thus, effectively limiting the production of 7nm or 5nm chips.
Before the sanctions, Chinese chipmakers only made semiconductors to meet a very small demographic and would use a small amount of machines to meet the demand. This meant that they could only experiment with new technologies when there was demand for them or when new capacity was added.
2. China Plays into the World Semiconductor Race to beat its now expanding need for chip self-sufficiency
Currently, the sanctions have changed the dynamics of production in China, with foundries now testing Chinese-made equipment to meet the standards of the foreign and replace them with their own. If they cannot get from the Western market the Chinese market is determined to make their own in place.
The Chinese Semiconductor market makes up 25% to 30% of the world market. A fact that many of the CEOs are aware of. Many of the CEOs, including the Intel CEO in July made it clear that the sanctions on China were effectively keeping them off a 25% market share and also the fastest-growing market in the world.
On the other hand, for the Chinese chip makers the sanction has reportedly led to increased gains in other semiconductor production equipment. The majority of the components used by Advanced Micro-Fabrication Equipment (AMEC), which reported a 32% year-on-year increase in sales of its etching systems in the first half of 2023, now source most of its components in China.
3. EUV lithography tools, pictured here, are on the Commerce Department’s restriction list.
Sales at Naura, a manufacturer of etch, deposition, cleaning, and other equipment, increased by 55% in the six months leading up to June. ACM, a manufacturer of cleaning supplies, recorded a 47% growth over that time.
The Huawei Ascend AI processors are now reportedly approaching the Nvidia standards according to analysts and users in China. In response to this in May Nvidia CEO Jensen Huang claimed “If [China] can’t buy from ... the United States, they’ll just build it themselves.”
Although China's chip-making industries still face serious bottlenecks. It is very clear that the future of semiconductor production and self-reliance is promising in response to the changing dynamics of the political and economic arenas.
