China Blames US for New Blow to Strategic High-Tech Industry

[Daniel Nenni]

Update 9/13/24, 2:47 p.m. ET: This article has been updated with extra context and comments from Daniel Nenni and the State Department.

China blames US for new blow to strategic high-tech industry

Beijing has criticized Washington for "coercing" allied nations like the Netherlands into tightening export controls on chipmaking equipment.

www.newsweek.com

 

[KevinK]

Update 9/13/24, 2:47 p.m. ET: This article has been updated with extra context and comments from Daniel Nenni and the State Department.

Great addition Dan !

"China is very resourceful and capable in a brute force manner. They are in production at 7 nanometers and developing 5nm chips, and I do not see anything stopping them from continuing," Nenni said. "China is outspending the rest of the world on semiconductor capital equipment on the open market, and there is also an active grey market for parts and services."

 

[fansink]

Great addition Dan !

"China is very resourceful and capable in a brute force manner. They are in production at 7 nanometers and developing 5nm chips, and I do not see anything stopping them from continuing," Nenni said. "China is outspending the rest of the world on semiconductor capital equipment on the open market, and there is also an active grey market for parts and services."

Shanghai Microelectronics Equipment (SMEE) had applied for a patent covering an EUV lithography machine, reports the South China Morning Post.

China’s chip making shows progress with new EUV patent despite US sanctions

The patent from Shanghai Micro Electronics Equipment is still under review, but producing EUV tools in China would break a monopoly held by ASML.

www.scmp.com

 

[user nl]

My two cents: ASML-CEOs are not happy, but the US still determines the shape and intensity of the chip-war (so far), it may be a long war......It will be crucial how BRICS+ will respond to the patent-issues, if China is not allowed to buy this EUV and DUV technology, at some point I think they will master the technology, breaking IPR or not, if needed "hiding" behind the same arguments of national security......


https://www.theregister.com/2024/07/08/us_china_chip_wars_ideological/
Former ASML boss Peter Wennink says the US-China "chip wars" are mainly ideological in nature, and is warning it will likely take decades for the dispute to play out.

 

[KevinK]

Shanghai Microelectronics Equipment (SMEE) had applied for a patent covering an EUV lithography machine, reports the South China Morning Post.

China’s chip making shows progress with new EUV patent despite US sanctions

The patent from Shanghai Micro Electronics Equipment is still under review, but producing EUV tools in China would break a monopoly held by ASML.

www.scmp.com

Anybody who watched the last round of EUV “patent wars” knows how paltry this news sounds. I think both Nikon and Korea had built out a portfolio of a few hundred EUV patents when these kinds of stories were being written:

Are Korean EUV Patents a Threat to ASML and TSMC?

Are Korean EUV Patents a Threat to ASML and TSMC? I should hope not but I will leave this to the EUV experts here on SemiWiki: Korean companies have made big progress in extreme ultraviolet (EUV) lithography technology. The number of EUV lithography-related patent applications filed with the...

semiwiki.com

 

[fansink]

Anybody who watched the last round of EUV “patent wars” knows how paltry this news sounds. I think both Nikon and Korea had built out a portfolio of a few hundred EUV patents when these kinds of stories were being written:

Are Korean EUV Patents a Threat to ASML and TSMC?

Are Korean EUV Patents a Threat to ASML and TSMC? I should hope not but I will leave this to the EUV experts here on SemiWiki: Korean companies have made big progress in extreme ultraviolet (EUV) lithography technology. The number of EUV lithography-related patent applications filed with the...

semiwiki.com

It’s a good thing that success is not limited by prior art.

 

[Jozo035]

Btw. similar situation is happening in china.

As the Electric Vehicle Industry Grows Globally, Beijing Wants Chinese EV Tech to Stay at Home​

China has strongly advised its carmakers to make sure advanced electric vehicle technology stays in the country, people familiar with the matter said, even as they build factories around the world to escape punitive tariffs on Chinese exports.​

China’s Ministry of Commerce held a meeting in July with more than a dozen automakers, who were also told they shouldn’t make any auto-related investments in India, the people said asking not to be identified discussing matters that are private, in another attempt to safeguard the know-how of China’s EV industry and mitigate regulatory risks. ​

https://time.com/7020556/china-ev-technology-export-control/

 

[Xebec]

Perhaps a really dumb question, but for military applications is a “3nm” chip really giving you that much benefit over a “7nm” chip these days? (or perhaps a 2nm vs 5nm which is what it looks like it’ll be in 2 years).

I can’t see weapons systems benefitting that much (is 3nm suddenly going to run AGI when 7nm can’t?), and space hardware needs mature chips for reasons. For large scale computing I can certainly see benefits of 3nm but China has no problem just simply solving the issue with brute force (just build 4x as much or whatever, and power it with whatever fuel source can be made available).

 

[fansink]

Perhaps a really dumb question, but for military applications is a “3nm” chip really giving you that much benefit over a “7nm” chip these days? (or perhaps a 2nm vs 5nm which is what it looks like it’ll be in 2 years).

I can’t see weapons systems benefitting that much (is 3nm suddenly going to run AGI when 7nm can’t?), and space hardware needs mature chips for reasons. For large scale computing I can certainly see benefits of 3nm but China has no problem just simply solving the issue with brute force (just build 4x as much or whatever, and power it with whatever fuel source can be made available).

High speed network meshed aerial countermeasures?

 

[Xebec]

High speed network meshed aerial countermeasures?

That’s not possible on 7nm?

 

[fansink]

That’s not possible on 7nm?

The faster, the safer. Faster takes out a missile further away, and allows for second shot.

 

[KevinK]

Btw. similar situation is happening in china.


https://time.com/7020556/china-ev-technology-export-control/

Could get interesting. China and their national champion EV makers, like BYD, are going to have to make the same tough choices they imposed on western companies in the past and present: either export domestically-made vehicles into high tariffs, or manufacture locally and meet rules-of-origin requirements that dictate a minimum level of value that must be created in the EU or North America (which the Chinese government is arguing against), to avoid the tariffs.

 

[skyfex]

My two cents: ASML-CEOs are not happy, but the US still determines the shape and intensity of the chip-war (so far), it may be a long war......It will be crucial how BRICS+ will respond to the patent-issues, if China is not allowed to buy this EUV and DUV technology, at some point I think they will master the technology, breaking IPR or not, if needed "hiding" behind the same arguments of national security......


https://www.theregister.com/2024/07/08/us_china_chip_wars_ideological/
Former ASML boss Peter Wennink says the US-China "chip wars" are mainly ideological in nature, and is warning it will likely take decades for the dispute to play out.

I wonder if they see a silver lining though. China has seem dead set on being fully technologically self-reliant. The lack of sanctions wouldn't have had a huge impact on their efforts to copy DUV and EUV technologies. In some ways it would slow them down (less urgency), in some ways it would speed up the efforts (getting more experience with how EUV machines work, perhaps some aid to reverse engineering efforts). In the long term this isn't good for ASML. As soon as China has a competing technology they will massively subsidize their industry to drive out competitors, as we've seen them do in other areas. That is if they still have the economic power to do so a decade or two down the line.

Though, of course, CEOs understandably tend to focus on short term profits.. so maybe they don't care.

at some point I think they will master the technology

I'm not so sure actually. The Chinese model seems to be near a breaking point. If this was any other country their chip efforts would be considered insane. No chip company in a free market could survive making 7nm chips without a strong international market with healthy profit margins. How many chip industry bankruptcies can the country handle? This is all funded by a staggering amount of debt in a debt-model that we know with full certainty is completely unsustainable

If they don't have mountains of money to throw at this effort anymore, it won't be so easy to master cutting edge technology. Remember that SMIC was built in part by poaching TSMC talent. It's hard enough to recruit talent to China already (no option for a non-Chinese to build a life there long term). If they can't pay top dollar for talent it'll be even harder.

This story is illuminating: https://theasymmetric.substack.com/p/china-ballpoint-pen-machine-tools

If they can't even build up a sustainable domestic economy around something as simple as a ballpoint pen tips, how will they build a completely self-reliant chip manufacturing economy? I think they will try, but I think there's a significant chance they'll break their own economy trying.

Perhaps a really dumb question, but for military applications is a “3nm” chip really giving you that much benefit over a “7nm” chip these days? (or perhaps a 2nm vs 5nm which is what it looks like it’ll be in 2 years).

I think the main concern is in training of AI / machine learning. That's going to be a huge deciding factor in future conflicts. It's not so much about the capability of one specific chip. It's about the ability to produce a huge amount of chips at the very cutting edge for thousands of data centers.

If China can't build a healthy market for truly cutting edge chips, at massive scale, they're going to be at a significant disadvantage in that area. Their domestic market alone is not enough to sustain this effort long term, so they need to actually be at the cutting edge to build an international market too.

 

[user nl]

I wonder if they see a silver lining though. China has seem dead set on being fully technologically self-reliant. The lack of sanctions wouldn't have had a huge impact on their efforts to copy DUV and EUV technologies. In some ways it would slow them down (less urgency), in some ways it would speed up the efforts (getting more experience with how EUV machines work, perhaps some aid to reverse engineering efforts). In the long term this isn't good for ASML. As soon as China has a competing technology they will massively subsidize their industry to drive out competitors, as we've seen them do in other areas. That is if they still have the economic power to do so a decade or two down the line.

Though, of course, CEOs understandably tend to focus on short term profits.. so maybe they don't care.



I'm not so sure actually. The Chinese model seems to be near a breaking point. If this was any other country their chip efforts would be considered insane. No chip company in a free market could survive making 7nm chips without a strong international market with healthy profit margins. How many chip industry bankruptcies can the country handle? This is all funded by a staggering amount of debt in a debt-model that we know with full certainty is completely unsustainable

If they don't have mountains of money to throw at this effort anymore, it won't be so easy to master cutting edge technology. Remember that SMIC was built in part by poaching TSMC talent. It's hard enough to recruit talent to China already (no option for a non-Chinese to build a life there long term). If they can't pay top dollar for talent it'll be even harder.

This story is illuminating: https://theasymmetric.substack.com/p/china-ballpoint-pen-machine-tools

If they can't even build up a sustainable domestic economy around something as simple as a ballpoint pen tips, how will they build a completely self-reliant chip manufacturing economy? I think they will try, but I think there's a significant chance they'll break their own economy trying.



I think the main concern is in training of AI / machine learning. That's going to be a huge deciding factor in future conflicts. It's not so much about the capability of one specific chip. It's about the ability to produce a huge amount of chips at the very cutting edge for thousands of data centers.

If China can't build a healthy market for truly cutting edge chips, at massive scale, they're going to be at a significant disadvantage in that area. Their domestic market alone is not enough to sustain this effort long term, so they need to actually be at the cutting edge to build an international market too.

I'm a physicist, not working in the semiconductor industry. Around 2014 I got privately interested in ASML and its EUV technology on a laser-based tin-plasma source as the basis for their HVM-machines. A challenging time to keep the semi-industry believe in ASML for scaling their source power, the most urgent issue around that time, besides masks, pellicles, contamination etc.

It took some 5 more years before TSMC in 2019 (very successfully) timed the (economically optimal) entry-point of EUV in HVM of leading edge logic manufacturing.

So, all the physics and R&D of EUV in HVM is solved at the basics. I see no reason that China will not be able to master in some way or another the EUV-basics (through laser-based tin-plasma a la ASML, via compact synchrotron-based EUV (they have many synchrotrons/XFELs in China) or other laser-technology based EUV (eg HighHarmonicGeneration based technology, see 2023 Nobel prize in physics).

Whether China will be able to master the economics and bring homebuilt EUV lithography to interested foundries (eg in BRICS+ countries) the future will tell.

Regarding CEOs and short term vision. I have seen (in person) the previous ASML CEO Peter Wennink in lectures/interviews, and to me he seemed one of the most intelligent and humble (long-term looking) CEOs of a large tech-company. Wennink was an accountant by training/education, and a "trained ape" (in his own words) by his environment at ASML, to be able to talk to the PhD-educated semi CEOs like Morris Chang and CC Wei at TSMC.

But forceful geopolitics between USA and China is not something Wennink could influence enough to his satisfaction, understandably in my opinion.

 

[jim_22222]

I'm a physicist, not working in the semiconductor industry. Around 2014 I got privately interested in ASML and its EUV technology on a laser-based tin-plasma source as the basis for their HVM-machines. A challenging time to keep the semi-industry believe in ASML for scaling their source power, the most urgent issue around that time, besides masks, pellicles, contamination etc.

It took some 5 more years before TSMC in 2019 (very successfully) timed the (economically optimal) entry-point of EUV in HVM of leading edge logic manufacturing.

So, all the physics and R&D of EUV in HVM is solved at the basics. I see no reason that China will not be able to master in some way or another the EUV-basics (through laser-based tin-plasma a la ASML, via compact synchrotron-based EUV (they have many synchrotrons/XFELs in China) or other laser-technology based EUV (eg HighHarmonicGeneration based technology, see 2023 Nobel prize in physics).

Whether China will be able to master the economics and bring homebuilt EUV lithography to interested foundries (eg in BRICS+ countries) the future will tell.

Regarding CEOs and short term vision. I have seen (in person) the previous ASML CEO Peter Wennink in lectures/interviews, and to me he seemed one of the most intelligent and humble (long-term looking) CEOs of a large tech-company. Wennink was an accountant by training/education, and a "trained ape" (in his own words) by his environment at ASML, to be able to talk to the PhD-educated semi CEOs like Morris Chang and CC Wei at TSMC.

But forceful geopolitics between USA and China is not something Wennink could influence enough to his satisfaction, understandably in my opinion.

china has a serious culture issue.
it has no idea on how to build some healthy work culture.
the man in this picture is the top physicist. vp of Tsinghua University.
his motto is working 16 hours a day , seven days a week. (aka 711)
what kind of people will work for him.

if they use the funding to hire the right people this could be done.
but with this kind of insane culture it will take a while.

 

[soAsian]

China excels at mass production, from solar panels to electric vehicles.

Once China acquires the technology, they can quickly ramp up mass production and outcompete Western companies.
While America's current strategy to block China from accessing EUV or DUV machines may seem flawed, handing China the keys to master semiconductor manufacturing would jeopardize Western industries.

Huawei, before US sanctions, had already mastered ARM design and is now outperforming Apple in China. Just look at Apple's declining iPhone market share in China. Moreover, SMIC can produce 7nm chips.
China is not concerned about profitability. They can continue to incur losses to dominate the market, subsidized by Chinese government funds or mass-producing products to sell at a low price, even at a loss, since the Chinese government aims to control the market.

Why are the US and EU complaining about China's overcapacity?

 

[Daniel Nenni]

Perhaps a really dumb question, but for military applications is a “3nm” chip really giving you that much benefit over a “7nm” chip these days? (or perhaps a 2nm vs 5nm which is what it looks like it’ll be in 2 years).

I can’t see weapons systems benefitting that much (is 3nm suddenly going to run AGI when 7nm can’t?), and space hardware needs mature chips for reasons. For large scale computing I can certainly see benefits of 3nm but China has no problem just simply solving the issue with brute force (just build 4x as much or whatever, and power it with whatever fuel source can be made available).

Lower power? I agree on performance and area assuming it is not AI which needs all of the performance they can get.

 

[tooLongInEDA]

Once China acquires the technology, they can quickly ramp up mass production and outcompete Western companies.
While America's current strategy to block China from accessing EUV or DUV machines may seem flawed, handing China the keys to master semiconductor manufacturing would jeopardize Western industries.

Huawei, before US sanctions, had already mastered ARM design and is now outperforming Apple in China. Just look at Apple's declining iPhone market share in China. Moreover, SMIC can produce 7nm chips.
China is not concerned about profitability. They can continue to incur losses to dominate the market, subsidized by Chinese government funds or mass-producing products to sell at a low price, even at a loss, since the Chinese government aims to control the market.

Why are the US and EU complaining about China's overcapacity?

I'm not sure what [Huawei] "mastering ARM design" means here and that it's really anything that much to brag about. It usually means slight customisation/configuration and implementation from RTL. Compared to many other leading edge chip design tasks, not of the highest difficulty. Nor one where the skills are that difficult or time consuming to master - or where experienced people can't be found and hired.

To the best of my knowledge Huawei never had an ARM architecture licence (like Apple for example). Happy to be corrected here. That's a whole different skill level.

 

[KevinK]

china has a serious culture issue.
it has no idea on how to build some healthy work culture.
the man in this picture is the top physicist. vp of Tsinghua University.
his motto is working 16 hours a day , seven days a week. (aka 711)
what kind of people will work for him.

And that takes a toll.

Why death of star scientist Li Haizeng, 34, has Chinese researchers taking note​

The death of material scientist Li Haizeng from a heart attack at the age of 34 has unsettled China’s research community, even those already mindful of the huge pressure facing the country’s scientists today.

Why death of Li Haizeng, 34, has other Chinese scientists taking note

Fear of being left behind drives academics to work harder, even at the expense of well-being and mental health, says university lecturer.

www.scmp.com

 

[KevinK]

Whether China will be able to master the economics and bring homebuilt EUV lithography to interested foundries (eg in BRICS+ countries) the future will tell.

Same is likely true for DUV for 7nm and 5nm nodes - right now they don't have the economics down for even that - it shows is SMIC's profitability, even with subsidies. And how likely is China to provide Intel with tools to advance their chip factories when China won't even allow their own EV companies to build plants in India for fear of low cost competition ?