The US government has introduced some of the most sweeping export controls but is aimed at cutting off China from advanced semiconductors. Analysts say the move could hamper China’s domestic chip industry.
Mandel Ngan | AFP | beautiful pictures
China’s ambitions to boost its domestic chip industry could become more difficult and costly after the United States rolled out some of the most widespread technology-related export controls against North Korea. Terrible.
On Friday, the US Department of Commerce introduced scan rule aimed at preventing China from buying or manufacturing chips and key components for supercomputers, in what is seen as a major escalation of tensions between Beijing and Washington in the technology sector.
The US argues that such advanced semiconductors could be used by China for advanced military capabilities.
“There’s no going back,” Abishur Prakash, co-founder of the Center for Future Innovation, a consulting firm, told CNBC.
“With the latest action, the gulf between the US and China has now widened to the point of no return.”
Here are some highlights of the new US rules:
- Companies require licenses to export high-performance chips, often designed for artificial intelligence applications, to China.
- Even foreign-made chips related to AI and supercomputers, which use US tools and software in the design and manufacturing process, will require a license to be exported to China. Country.
- American companies will be heavily restricted from exporting machinery to Chinese companies that are producing chips of a certain level of sophistication.
“The latest chip rules are a sign that Washington is not trying to rebuild relations with Beijing. Instead, the US has made it clear that it is taking this competition more seriously than ever and is ready to do so. taking steps that were previously unthinkable,” says Prakash.
What impact will US restrictions have on China?
Semiconductors are some of the most important technological products. They go into everything from smartphones to cars and refrigerators. But they are also seen as key to military applications and the development of artificial intelligence.
As geopolitical tensions between China and the US have increased over the past few years, technology, and especially sensitive sectors like chips, have been dragged into the fray.
Artificial intelligence, quantum computers and semiconductors are all areas that China has identified as “border” technology they want to strengthen their domestic capabilities. But new US regulations will make that extremely difficult, especially in the chip sector.
Pranay Kotasthane, chair of the high-tech geopolitics program at the Takshashila Institute, told CNBC: “The US has officially shifted its goal from overtaking China in the semiconductor industry to actively denying access to advanced chips.
“China’s homegrown chip sector will be hit by these broad control measures.”
The nature of the supply chain
The reason why U.S. export controls can be so effective is how they can touch certain parts of the semiconductor supply chain, even those that are not directly involved. based in the US or controlled by US companies.
That depends on the global nature of the chip supply chain but also on how few companies control power and expertise.
The United States, while strong in many areas of the market, has lost its dominant position in the manufacturing sector. Over the past 15 years, Taiwan TSMC and Korea SAMSUNG has dominated the production of the world’s most advanced semiconductors. IntelAmerica’s largest chipmaker, has fallen far behind.
Reinventing the wheel would now be much more expensive (for China).
Pranay Kotasthane
Takshashila Institute
Taiwan and South Korea account for about 80% of the global foundry market. Foundries are chip manufacturing facilities designed by other companies.
However, the US still boasts strong companies in the design tools space, many of which are used by other companies in the supply chain. For example, it is unlikely that the advanced chips made by TSMC will not use American tools somewhere along the way. In this case, US export restrictions to China will apply.
Washington used the so-called foreign direct product rule on the child poster of the Trump-era US-China tech tension – Huawei. Under those rules, Huawei was cut off from the most advanced chips that TSMC is making and designed for its smartphones. Huawei, once the number one company in the smartphone market, saw its handset business crippled.
But never before has such a rule been used so widely in the United States
China will need to ‘reinvent the wheel’
Meanwhile, other countries may come under pressure not to ship certain equipment to China. For example, the latest rules mean that companies will need to obtain permits to ship machinery to Chinese foundries if those facilities are producing certain memory chips or logic semiconductors. nanometer, 14 nanometer or less.
The nanometer refers to the size of each individual transistor on a chip. The smaller the transistor, the more transistors that can be packed on a single semiconductor. Usually, reducing the nanometer size can lead to more powerful and efficient chips.
China’s most advanced chip maker, Semiconductor Manufacturing International Co. or SMIC, currently producing 7nm chips, but not on a large scale. That is generations after TSMC and Samsung only one 2nm chip production roadmap.
But to make chips of this sophistication on a large scale, at a lower cost and with greater reliability, SMIC and other Chinese foundries will need to have a specific set of tools on hand. called ultraviolet lithography. Dutch company ASML is The only company in the world capable of manufacture this important piece of equipment.
If it is subject to US export restrictions or pressure from Washington not to sell to Chinese companies, this could hamper the progress of the country’s chipmakers.
ASML emphasizes the complexity of the semiconductor supply chain.
“Semiconductor manufacturing is a hyper-globalized supply chain,” said Kotasthane. “Being cut off from this engine will mean Chinese companies have to ‘reinvent the wheel’ in the country. China’s semiconductor industry will need much more capital and human resources to weather this shock,” Kotasthane said.
But this will be a tough climb.
Kotasthane said that China will be able to produce advanced chips even without ASML’s machines “but the output will be much lower, which means higher costs and lower reliability.”
Meanwhile, Chinese companies will have to rely on “lower-end” domestic alternatives to design tools, Kotasthane said, they will usually received from American and Japanese companies.
Washington’s latest regulations also require any “Americans” to obtain a license if they want to assist in the development or production of semiconductors at certain manufacturing facilities based in China. This effectively cuts off a key US talent pipeline to China.
“Reinventing the wheel now would be much more expensive,” says Kotasthane.
