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China goes all out to progress chipmaking leading to 7nm chips

The Trump administration’s move to block global chip supplies to blacklisted telecoms equipment giant Huawei Technologies and other Chinese companies may well prove to be a costly, short-term punitive measure.

The rule introduced in May expanded US authority to license suppliers for sales to Huawei of semiconductors made abroad with US technology, vastly expanding its reach to halt exports to the world’s No. 2 smartphone maker.

This despite the fact that China has imported at least $300 billion worth of semiconductors for the third year running in a sign of continuing reliance on foreign know-how despite efforts to develop local capability. The loss of such a massive market that will undoubtedly impact chipmakers worldwide and only serve to push local developments further and faster in China.

While the rule change was aimed at squeezing Huawei, it has also hit the chip foundries it relies on. US manufacturers of chipmaking equipment could face long-term pain, especially if Chinese chipmakers were to develop new equipment sources beyond the reach of US rules.

And that appears to be precisely what is happening. China has been spending billions of dollars in an effort to try to speed up improvements to its domestic chipmaking industry being led by the likes of its biggest chipmaker, Semiconductor Manufacturing International Corp (SMIC), that plans to increase its capital spending sharply.

The US moves triggered Phase II of China’s National Integrated Circuit Industry Investment Fund to invest $29 billion in the sector – nearly double the amount of Phase I, according to Strategy Analytics. The goal of Phase II is to make China self-sufficient in semiconductor production starting with the 28-nm CMOS node (in high demand for IoT devices ranging from cars to home appliances and edge computing). This is the most widely-used fabrication node for integrated circuits, and the first Chinese assembled 28nm machine is scheduled for customer delivery by the fourth quarter of 2021.

20nm chips are planned for early 2023 without recourse to US fabrication technology and equipment, mainly due to progress at Shanghai Micro Electronic Equipment (SMEE) in developing ultraviolet (UV) based lithographic technology.

UK site, Verdict, reports that “UV circuit design printing, using laser beams, was pioneered by Holland’s ASML. It is the sole supplier at present of extreme ultraviolet (EUV) lithographic technology – the leading technology for making chips at 7nm transistor line widths and below for among other things top-end smartphone processors, GPUs and AI chips.

EUV is presently in use at the only two foundries in the world able to produce such ‘leading-edge’ chips, namely TSMC and Samsung.

Japanese companies led by Tokyo Electron and Lasertek have been at the forefront of developing deep ultraviolet (DUV) light source materials, coatings and etching and inspection systems for making ‘trailing edge’ chips at 28nm and above. SMEE is using some Japanese components.

Unlike photolithographic fabrication technology, the current basis for making virtually all the world’s chips, UV laser circuit printing has no dependence on US technology or intellectual property (IP).”

The country’s semiconductor industry has entered an era of rapid commercialization and openness. Achieving semiconductor independence is also written into the 13th Five-Year Plan issued in 2016. From 2018 to 2020, China is unveiling a series of tax incentives for the semiconductor industry. Furthermore, there will be new guidance on the technology roadmap for the next-generation semiconductors in the forthcoming 14th Five-Year Plan.”

According to Omdia, “China’s semiconductor industry reached a value of around $105 billion (more than CNY700 billion) in 2019 with the design segment accounted for more than $40 billion. China’s packaging and testing market is booming and is changing rapidly. It is also the fastest-growing sector with the most prominent effect on the integrated circuit industry. In the golden period of the past ten years, the domestic packaging and testing industry has moved from catching up with the world leaders to being one of them, which boosts confidence in the internationalization of the country’s packaging and testing industry.”

In an interview with Wei Shaojun, Professor at Tsinghua University and Vice Chairman of the China Semiconductor Industry Association (CSIA), the time is right for the Chinese semiconductor industry to flourish because companies need alternative sources to ensure the security their supply chains.

However, a recent Goldman Sachs report predicted SMIC would move from 14nm to 12nm chips during 2020, but would not reach production of the 7nm chip process until 2023, or 5-nm until 2025. By comparison, TSMC already produces 7nm chips and will soon have 5-nm chips. The size of chips is continually shrinking as production facilities upgrade their processes.

If history is any indication, China will achieve its chipmaking goals, ultimately at the expense of current suppliers that have been caught up in trade politics beyond their control.-Disruptive Asia

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