Leap in China's chip production

Despite facing a series of restrictions from the US, China's ambition to be self-sufficient in semiconductor production is starting to bear fruit.

In October 2022, the US issued a series of new export control regulations targeting China's AI and semiconductor industries. In the following months, China's response was considered "disproportionate", mainly publicly criticizing US actions at many diplomatic forums, or filing lawsuits with the World Trade Organization. (WHO).

However, in reality, China has shaped its semiconductor autonomy strategy not since October 2022 but April 2018, when the US imposed strict export controls on ZTE - one of the leading companies in the world. China's leading telecommunications company.

Booth of China's largest chip manufacturer SMIC in Shanghai in 2020. Photo: Reuters

"The experience with ZTE makes Chinese leaders view the semiconductor industry primarily in terms of national security, not simply economic terms. They believe that more extreme moves by the US in the future will The future is inevitable," the US Center for International Strategic Studies (CSIS) commented in a report in May.

In 2015, China announced the Made In China 2025 policy with the goal of semiconductor autonomy. However, this ambition is becoming more secret, as it no longer appears in many leadership speeches. However, there is much evidence that this is still a key goal, especially after the ZTE incident.

Identify "bottlenecks"

In July 2018, Science and Technology Daily , part of China's Ministry of Science and Technology, published a series of articles detailing the most vulnerable technological "bottlenecks." 35 points were identified, 7 of which are directly related to the semiconductor industry, spanning nearly every segment of the semiconductor value chain. The most highlighted bottleneck is heavy dependence on US, Japanese and European suppliers, and the difficulty of producing substitute products.

"These articles are a rare example of how the Chinese government provides specific information about a vague but extremely important phrase: core technologies and core technologies controlled by others ", commented CSIS analyst Ben Murphy.

Workers are operating the system in a chip factory in Anhui in 2018. Photo: Reuters

The bans recently introduced by the Netherlands clearly show this bottleneck. Currently, the global semiconductor production chain includes about 300 input components, supplied by dozens of countries. However, the bottleneck involves Dutch ASML - a company with a near monopoly on advanced photolithography techniques. Lithography is the process of "printing" integrated circuit patterns onto silicon wafers, requiring modern machinery with the highest precision. To date, the company owns two leading printing techniques: ultraviolet (EUV) photolithography and the older deep ultraviolet (DUV) technology.

ASML already has chip manufacturing machines on a sub-10 nm process, while China's only lithography maker, Shanghai Micro Electronics Equipment (SMEE), can only make 90 nm chip manufacturing machines. However, in early August, Bloomberg quoted sources saying that SMEE had just achieved an important step forward when it was ready to deliver the first 28 nm chip manufacturing system by the end of the year. This is considered a breakthrough for the Chinese chip industry after the US embargo. The production of lithography equipment is considered an important link in any country's ambition to become semiconductor self-sufficient.

While domestic photolithography machines cannot be used, Chinese chip companies must import equipment equipped with old technology that does not violate the US ban. Using DUV machines, semiconductor company SMIC is said to have produced chips at the 7 nm level with limited commercial output.

A big step forward through Huawei phones

Huawei is one of the companies most affected by the US ban since May 2019. But at the end of last month, the company suddenly launched Mate 60 Pro even though the Mate series introduction schedule is usually in September or October every year. At that time, the company did not mention the chip or the mobile connection technology inside.

Mate 60 Pro internal motherboard. Photo: Bloomberg

On September 4, research company TechInsights (USA) "discerned" a new phone and confirmed that the device is equipped with a Kirin 9000s chip manufactured by SMIC, showing that China is making important progress in building a mobile phone system . domestic chip ecosystem when SMIC has succeeded with chips on the 7 nm process.

Similar to Huawei, SMIC is also listed on the commercial blacklist. According to public documents, the highest technology they have achieved is 14 nm, while the main products are still old technology chips with a process of 28 nm or higher, which means 8 years slower than the most advanced technology. Currently. However, new findings show that China's chip manufacturing capabilities are now only 5 years behind and getting closer to the goal of self-sufficiency in the semiconductor field.

Dan Hutcheson, Vice President of TechInsights, commented that the Kirin 9000s chip is an important statement from China. And Steven Leung, CEO of UOB Kay Hian (Hong Kong), said that this is a great motivation for SMIC and the Chinese semiconductor industry to be able to advance so far in the semiconductor market so quickly, despite some questions about the semiconductor industry. violating sanctions is being left open.

"The new chip can be seen as representing an important milestone in semiconductor design and manufacturing in China," Hutcheson told SCMP .

Meanwhile, CCTV also praised the Mate 60 Pro as a phone powered by "Chinese chips", and said that 10,000 components in this smartphone are produced domestically, although it did not specify any supplier. In the report dated September 8. Bloomberg noted that the proportion of Chinese components in phones is "unusually high".

"With components that are almost exclusively 'made in China' except for LPDDR5 memory and SK Hynix's NAND Flash, Huawei seems to have achieved the seemingly impossible, despite the difficulties of a series of technology embargoes." ", Radu Trandifir, technical expert at TechInsights, told Bloomberg .

The future is promising

According to Reuters , the Chinese government is preparing to launch an Integrated Circuit Industry Investment Fund, also known as Big Fund. The fund's goal is to mobilize 300 billion yuan ($41 billion), a scale far exceeding previous funds established in 2014 and 2019 with capital of less than $27 billion. This is considered the answer to the $52 billion funding package that the US launched last August.

According to experts, the new ambition and recent progress are showing China's capabilities. "I don't underestimate China's ability and determination to find ways to build next-generation technologies, as well as leverage some of the older technologies to create really important products," he said. Daniel Newman, CEO and principal analyst at Futurum Group, told CNBC .

Meanwhile, Paul Scharre, Vice President and Research Director at the Center for a New American Security consulting organization, said that with China, nothing is impossible. "In the long run, the Chinese will probably make great progress. Most likely, they will do it faster than expected," Scharre commented.

However, Charles Shi, a semiconductor analyst at Needham & Company, said that China is showing progress in producing chips based on older technology nodes. The road ahead is not smooth as it is likely that the US will impose more bans in the future. However, there are signs that China's position is no longer the same as it was five years ago.

Bao Lam

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