China does not kneel before the US: it knows that without its market the western chip industry will suffer

[beijingwalker]

China does not kneel before the US: it knows that without its market the western chip industry will suffer​

by Ruetir
April 21, 2023
in Technology

Breaking an economic power like China is not easy. The sanctions that the Western alliance led by the United States has implemented seek to prevent this Asian country of continental proportions from being able to manufacture cutting edge semiconductors. And the most effective a priori strategy to achieve this is to prevent it from being able to get hold of the most sophisticated lithography equipment produced by the Dutch ASML and the Japanese Tokyo Electron, among other companies.

In recent months, the Joe Biden Administration has increased the pressure it is exerting on the Netherlands, Japan and South Korea to get them to close ranks around the United States and prevent the arrival of their most advanced lithography machines in China. This equipment cannot be obtained in parallel markets, not only because of its high cost and large dimensions; also because its implementation requires the joint effort of the manufacturer of the lithography machine and the company that is going to use it to manufacture chips.

However, the tensions that are shaping the behavior of the semiconductor industry today do not spread in only one direction. The governments of the United States, the Netherlands, Japan and South Korea are enduring pressure from their own companies. For them, losing a client with the economic capacity that China has is not an option, so their demands on their respective governments have caused the latter to be forced to limit the scope of sanctions to what is strictly necessary.

Despite sanctions, China’s chip industry continues to grow​

At the end of last March Peter Wennink, the general director of ASML, traveled to China with one purpose: to massage the Xi Jinping government to relax the tension that the sanctions have unleashed between his company and the latter. The Government of the Netherlands has prohibited ASML from selling its extreme ultraviolet (UVE) and deep ultraviolet (UVP) lithography equipment to China. These are their most sophisticated photolithography machines, but they are by no means the only ones made by this Dutch company.

30% of the orders that ASML will deliver in the future come from Chinese customers

ASML also produces the lithographic equipment used to manufacture the integrated circuits required by the automotive industry and manufacturers of devices equipped with an Internet connection, such as mobile phones, tablets or personal computers. These machines do not allow to produce cutting-edge chipssuch as the 3nm semiconductors that TSMC and Samsung are already manufacturing thanks to ASML’s UVE teams.

However, they do serve to fine-tune basic general purpose processors, controllers and communications chips, among other semiconductors, which require a very wide range of devices. Wennink confirmed after his trip to China that 30% of the orders that ASML will deliver in the future come from Chinese customers. This lawsuit is free of the sanctions imposed by the US-led alliance because these customers want to buy mature lithography machines, and not UVE and UVP equipment, which, as we have recalled a few lines above, is what ASML cannot sell. to China.

What is surprising is that the Chinese semiconductor industry continues to grow at a good pace despite the aggressive economic situation that hangs over it. In fact, in November 2022 ASML confirmed that 18% of the 38,000 million euros that he had sold at that time are associated with Chinese customers. In practice, this means that much of the lithography equipment that it has to deliver over the next two years will go to the semiconductor plants of Chinese companies, such as SMIC or Hua Hong Semiconductor.

Much of the lithography equipment that ASML has to deliver over the next two years will go to the semiconductor plants of Chinese companies

ASML has a leading role in the semiconductor industry because it is the only company that makes UVE equipment, but it is by no means the only company that is heavily dependent on Chinese customers. Other firms, such as the American Lam Research, which also develops lithography equipment and technologies, will hardly be able to face a prosperous future without China. Xi Jinping’s government knows that large foreign companies in the semiconductor industry are highly dependent on their own companies, and this has put it in a position of strength that will surely help it better weather Western sanctions.

China does not kneel before the US: it knows that without its market the western chip industry will suffer

Breaking an economic power like China is not easy. The sanctions that the Western alliance led by the United States has implemented seek to prevent this Asian country of continental proportions from being able to manufacture cutting edge semiconductors. And the most effective a priori strategy...

www.ruetir.com

 

[MH.Yang]

Demand determinism

These Americans should have a better understanding of Keynes' theory than we do. But the fact is clearly not.

 

[大汉奸柳传志]

government procurement is the largest piece of pie and we shall see how easily Micron is getting ousted.

 

[gambit]

Taiwan foundries see surge in orders transferred from China

The US' escalation of the chip war with China has prompted more companies to shift their orders to Taiwan-based pure-play foundries. However, contract prices provided by TSMC and other Taiwanese foundries for orders transferred from Chinese counterparts are highly stiff, with many requesting...

www.digitimes.com

Taiwan foundries see surge in orders transferred from China​

The US' escalation of the chip war with China has prompted more companies to shift their orders to Taiwan-based pure-play foundries. However, contract prices provided by TSMC and other Taiwanese foundries for orders transferred from Chinese counterparts are highly stiff, with many requesting long-term contracts, a specific scale, and even "designation fees," according to industry sources.​

​

Qualcomm has also reduced wafer starts at SMIC significantly while moving more orders to Taiwan-based foundries.​

Here is what it really means...

China has been determined to use domestic tools long before the US 'chip war'. As I have explained the qualification process before, each process change must be approved by customers and that approval is via contracts, often 2-3 yrs. Established manufacturers and products often get 3-5 yrs.

So what constitute a 'process change'?

A new shrink or a new tool qualify. Toolmakers like ASML are established. Buying their tools raises one's estimation in the global market. Teradyne and Advantest are more examples. Customers are not afraid of a new toolmaker provided that the semicon company that uses the new toolmaker go thru the normal engineering qualifying process which can take up to two yrs. This shift of contracts from China to Taiwan is signal that customers are uncertain of the quality of semicon products that uses Chinese toolmakers, especially with the absence of established US software and hardware components stopped by this US sanctions.

But wait...There is more...

SK Hynix May Sell Yet-to-Be Completed Chinese Fab: Report

Market uncertainties plus China sanctions

www.tomshardware.com

SK Hynix is reportedly delaying the completion of its second 3D NAND facility in Dalian, China. This decision comes in response to shrinking memory market demand and U.S. restrictions on exports of advanced fab tools to China, reports DigiTimes, citing South Korean media. Furthermore, due to troubles with importing wafer fab equipment to China, SK Hynix may even sell the fab shell upon completion before moving in the wafer fab tools.​

​

To make the fab competitive in the long term, SK Hynix must target 3D NAND production nodes with 200 or even 300 layers.​

Hynix cannot afford to wait 2 yrs qualification time for China sourced products. The best path is qualify the new fab at older tech nodes but with that 2 yrs qualification time, Hynix would end up further behind its competitors. To be competitive, Hynix must start with the latest nodes for that 200-300 layers NAND. Selling that Dalian fab shell make tactical sense.

 

[gambit]

NAND flash beyond 200 layers? Chinese equipment vendor admits difficulty

As a result of an report indicating that Chinese memory chip maker Yangtze Memory Technologies Corp. (YMTC) is planning to use domestically sourced equipment to make advanced flash memory products following US sanctions, China's homegrown semiconductor equipment vendor Advanced...

www.digitimes.com

NAND flash beyond 200 layers? Chinese equipment vendor admits difficulty​

Unfortunately, the rest of the article is paywalled. Nevertheless, the headline is revealing enough that Chinese semicon toolmakers are having difficulties with their equipment producing SALEABLE yield on a consistent basis at NAND 200 layers and greater.

And what is profitable yield? It depends on the semicon product.

Managing Wafer Yield Across Semiconductor Fabrication

Semiconductor profitability is related to the percent of useful die per wafer. Learn how to monitor and optimize yield within and across all fab operations.

www.ni.com

Wafer yield, or the percentage of accepted die per wafer, is a critical metric for semiconductor operations. All fab processes must ramp to steadily create consistent wafers with profitable average yield.​

NAND is considered commodity product and that means per wafer yield must breach the %95 threshold in order to make profit.

https://smithsonianchips.si.edu/ice/cd/CEICM/SECTION3.pdf

See figure 3-1 for example.

If Chinese semicon equipment vendor cannot make their tools produce greater than %90 per wafer yield, no international customer will buy from any Chinese semicon company that uses tools from that Chinese semicon toolmaker.

 

[beijingwalker]

Cutting both ways, we'll see who will have the last laugh. US bans cooperation with China in space technology over a decade ago and have to say that ban helped China tremendously.

 

[VCheng]

Cutting both ways, we'll see who will have the last laugh. US bans cooperation with China in space technology over a decade ago and have to say that ban helped China tremendously.

So if such bans help China "tremendously" then why do you lot complain so much about them?

 

[beijingwalker]

So if such bans help China "tremendously" then why do you lot complain so much about them?

Why do you think it's a complain? it shows how dumb US policy is as always.

 

[VCheng]

Why do you think it's a complain? it shows how dumb US policy is as always.

So what you post is mere "criticisms" of US policy? Why not rejoice that your opposition is so dumb and China's high IQ will ensure it victory?

 

[Ahmadbhutta01]

When do u think china will become sufficient in chip making not having to depend on west ?
@beijingwalker

 

[beijingwalker]

When do u think china will become sufficient in chip making not having to depend on west ?
@beijingwalker

I will say about a decades, same time frame China achieved space and engine self dependence after the west banned them into China. I believe that market eventually decides everything, China is where the market lies, without Chinese market, the chip development in the west will also be crimped, one can't produce lots of chips but no customers to sell to.

Chip Makers, Once in High Demand, Confront Sudden Challenges

Demand for semiconductors was off the charts last year. But a sharp slowdown coupled with new U.S. restrictions against China have created obstacles.

www.nytimes.com

 

[gambit]

Cutting both ways, we'll see who will have the last laugh. US bans cooperation with China in space technology over a decade ago and have to say that ban helped China tremendously.

There is a difference here. There is no loss to China being behind US in space. China's space program is essentially a state enterprise, so was US early space program. No public competition. Semicon is not the same. The longer the Chinese semicon industry remains technology and manufacturing behind the rest, eventually the Chinese semicon industry will have to become SOE to survive where the State will force Chinese companies to use Chinese semicon products.

Decoupling from China will not be easy for the rest of the semicon industry, but it is happening. No amount of supposedly 'good' news out of China you guys post will stop that progress. You guys do not know what you are talking about and mislead the readers, but that is to be expected with propagandists. Do you deny the details I gave, details that none of you know because none of you are in the business?

 

[Darth Vader]

In most cases sanctions hit common people more harder than the ruling class, as mostly its make people lifes harder so they can go against the people in power.

in China's case it wont help much, Yes it will have affect in short term, 5 - 10 years for some countries but China in long run will go ahead, Unless this was 80s China and US stopped now thats not the case, the human resources and the capital they have it will take some extra time but they will get there.

US needs to move on and stop interfering in other countries.

 

[gambit]

...China is where the market lies, without Chinese market, the chip development in the west will also be crimped, one can't produce lots of chips but no customers to sell to.

To wit -- bullshit.

SK Hynix sees H2 memory chip rebound; outlook helps shares brush off record loss | SaltWire

By Joyce Lee and Heekyong Yang SEOUL (Reuters) -South Korea's SK Hynix Inc on Wednesday said production cuts by memory chip makers will improve market ...

www.saltwire.com

And that is just from one company where its customers gave the signs of a recovery. Profits from this recovery will be used to continue to push the industry in decoupling from China. The reality is that COVID did more than US tech sanctions to make the industry realize the follies of putting so much manufacturing capabilities in China. The came the dishonesty from China about COVID. Then came talks of war against Taiwan. Now, China pretty much said there is no such thing as sovereignty. There are behind closed doors talks among the industry's execs that the fear of China seizing foreign owned assets is no longer theoretical.

 

[dbc]

To wit -- bullshit.

SK Hynix sees H2 memory chip rebound; outlook helps shares brush off record loss | SaltWire

By Joyce Lee and Heekyong Yang SEOUL (Reuters) -South Korea's SK Hynix Inc on Wednesday said production cuts by memory chip makers will improve market ...

www.saltwire.com

And that is just from one company where its customers gave the signs of a recovery. Profits from this recovery will be used to continue to push the industry in decoupling from China. The reality is that COVID did more than US tech sanctions to make the industry realize the follies of putting so much manufacturing capabilities in China. The came the dishonesty from China about COVID. Then came talks of war against Taiwan. Now, China pretty much said there is no such thing as sovereignty. There are behind closed doors talks among the industry's execs that the fear of China seizing foreign owned assets is no longer theoretical.

To add another dimension to the risk of dependence on Chinese markets being discussed in board rooms everywhere is the events leading up to H&M's forced exclusion from the China market. You see it happening now with BMW and the ice cream controversy as well. The Chinese Government controls market access and uses it as a political tool. The German Foreign Minister makes unwelcome statements in Beijing and suddenly German access to Chinese markets is at risk through a convenient faux pas by BMW employees that went viral over Chinese social media.

Business are busy de-risking by reducing supply chain reliance on China and by ring fencing the Chinese market, by sourcing and manufacturing locally exclusively for the Chinese market.