US introduces new restrictions for exports of chipmaking tools to China

nanoguy

Posts: 1,243   +24
Staff member
Why it matters: The US is moving to prevent China's semiconductor industry from using advanced chipmaking tools, which may also impact American, South Korean, and Taiwanese companies operating in the region. Whether or not this will have the desired effect on China's semiconductor ambitions remains to be seen.

Most analysts expect China's leading tech companies will soon post their worst-ever quarterly results after being hammered by regulatory crackdowns and lockdown-related factory output issues. While this will make it harder for the country to weather the economic storm, the Chinese government's plan for technological self-sufficiency has a more pressing obstacle it has yet to overcome.

Bloomberg notes that the US is adding more restrictions on chipmaking equipment sold to Chinese foundries. This change comes in response to incredible advances made by Chinese companies in areas like NAND and DRAM manufacturing and advanced logic like CPUs and GPUs.

For instance, Yangtze Memory Technologies Co (YMTC) is already mass-producing 128-layer 3D NAND that can achieve similar performance to comparable offerings from Samsung, SK Hynix, and Micron. And while those companies can produce faster and higher-density NAND, Apple is considering using YMTC NAND for the base model iPhone 14.

When zooming out, China is leading the world in building more chip factories, gradually reducing the number of chips it needs to import every year. In the first five months of 2022, China imported over 232 billion chips worth around $174 billion. In response, the Chinese government is considering waiving taxes on imports of materials and equipment for high-tech manufacturing until 2030, and local foundries are getting significant subsidies to expand capacity as quickly as possible.

The 10-year cost of ownership for chip foundries in China is almost 40 percent lower than in the US. By 2025, analysts expect 12 new manufacturing facilities to be operational in the US, while China wants to build as many as 31. However, Chinese chipmakers are having difficulties securing the necessary lithography tools for advanced process nodes, so they're mostly buying old second-hand machines from Japan to populate the new factories.

China's acquisition difficulties stem from the US pressuring ASML, which makes 95 percent of all DUV and EUV lithography tools, to stop selling equipment to Chinese chipmakers. The Commerce Department is now insisting suppliers like Lam Research, Applied Materials, and KLA Corp. apply the same treatment so that Chinese companies will be limited to using 14nm and older process technologies.

Interestingly, the new restrictions will apply to all factories operating in China, which means they would also affect companies like Samsung, SK Hynix, UMC, and TSMC. In the past two weeks, the Biden administration has sent letters to all US-based suppliers telling them not to supply equipment for 14nm and newer process nodes due to national security concerns. This mandate lends credibility to a report that White House officials had also instructed Intel to cancel its plans for a wafer manufacturing facility in Chengdu, China.

Last week, the US Senate passed the $52 billion CHIPS Act to boost US-based semiconductor manufacturing. Companies like Intel, TSMC, Samsung, and Micron are all interested in taking advantage of it. Unsurprisingly, accessing those funds will be next to impossible for firms currently operating in China and other unfriendly countries and those that plan to do so in the future.

Despite the mounting restrictions, China seems determined to make progress at all costs. The country has repeatedly poached engineering talent from Taiwan, creating yet another source of tensions in the region. Not only that, but China's SMIC has seemingly figured out how to make 7nm chips, likely by closely copying TSMC's first generation 7nm process technology.

Of course, those 7nm chips were found inside a Bitcoin miner by the folks over at Tech Insights, who believe SMIC can't yet produce more advanced logic on a 7nm process. However, China is ready to spend as much as 10 trillion yuan ($1.47 trillion) to achieve technological self-sufficiency, and it's already making progress in terms of its global market share of semiconductor sales.

According to the Semiconductor Industry Association, China's global market share has surpassed Taiwan's and is slightly behind Japan's. Assuming the same rate of growth observed in the past two years, it could reach as high as 17 percent by 2024.

Masthead credit: LAM Research

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Watzupken

Posts: 699   +586
It's a must to keep their interests longer in the world.


corrected for you , you're welcome
This is correct. I feel US have claimed time and again that China is spying through their hardware/ equipment. Yet after so many years, they have not been able to prove it. And truth to be told, I don’t believe no other countries are doing the same. It’s the same claim that there is weapons of mass destruction in Iraq. It’s been a few decades, and I wonder if US is still digging the ground to substantiate their claims.
 

umbala

Posts: 781   +1,542
This is correct. I feel US have claimed time and again that China is spying through their hardware/ equipment. Yet after so many years, they have not been able to prove it. And truth to be told, I don’t believe no other countries are doing the same. It’s the same claim that there is weapons of mass destruction in Iraq. It’s been a few decades, and I wonder if US is still digging the ground to substantiate their claims.
Blah blah blah, they can't prove China is spying and you can't prove they aren't spying. Obviously both sides are spying on each other as much as they can. Instead of talking about things we can't prove how about talking about more important things?

I got nothing against China, but why does every single product on earth have to be made in China? You talk about US interests, so explain to me how it's in any country's interest (other than China) to have every single thing manufactured there? Sure, we get cheap crappy merchandise that consumerists gobble up, but all this doesn't help anyone in the long run. Well, except China.
 

Tantor

Posts: 371   +645
I got nothing against China, but why does every single product on earth have to be made in China? ... all this doesn't help anyone in the long run. Well, except China.

The Western elites have a very large proportion of non European members who decided it was in their best interests. It really is that simple.
 

Tantor

Posts: 371   +645
I dunno why US of A just dont sanction whole world at once. It will be easier for all...

Good idea. Ulysses S. Grant once said that the best way to show up a bad law is to enforce it to the maximum extent possible. So just sanction the entire world at once. That way we'll quickly find out if it works.
 

Mouseface

Posts: 77   +88
Blah blah blah, they can't prove China is spying and you can't prove they aren't spying. Obviously both sides are spying on each other as much as they can. Instead of talking about things we can't prove how about talking about more important things?

I got nothing against China, but why does every single product on earth have to be made in China? You talk about US interests, so explain to me how it's in any country's interest (other than China) to have every single thing manufactured there? Sure, we get cheap crappy merchandise that consumerists gobble up, but all this doesn't help anyone in the long run. Well, except China.

China has been stealing and thieving from the rest of the world for decades and its state led strategy. China benefits massively from WTO membership but they dont follow even its basic rules. For example, forced IP transfer from companies who wish to have access to Chinese market, transparency on state subsidies into companies are two simple examples of rules China breaks. China also heavily subsidises industry and then dumps huge amounts of product to destroy the global market (example, steel and aluminium) then when foreign steel companies struggle into bankrupty China buys the companies and then puts the price of the product back up... This is market manipulation.

China is also the only country that has been allowed to list its companies on the US stock market without audt requirements and we have seen CHina steal investors money through the likes of Luckin Coffee fraud scandal or more recently DiDi listing fraud. They literally stealing money in broad daylight and only now we are waking up.

China has a state sponsored theft regime also, look: https://www.cbsnews.com/news/chines...operty-from-about-30-multinational-companies/

China plays very dirty and always fails to live up to promises. China does not deserve any investment and CHina does not deserve to make products for the west.

At least from an environmental perspective we need to move production close to the consumer

For morality reasons we need to friend shore... China fully supports Russias war and all the information you think you know about CHina is mostly Chinese propaganda and wumaos spreading their toxic bullshit online...

If you want to really see what CHina thinks and says check out TGTM which china HATES, they keep brigading it and mass reporting it to get it suspended, same as youtube channles they dont like, they try to export their dirty censorship on to the rest of us, look at hollywood etc

See into real CHina:
https://twitter.com/TGTM_Official

Also the 7nm breakthrough is not at all what you think... https://www.theregister.com/2022/08/01/column_7nm_chips_china/
 

takaozo

Posts: 420   +641
I don't know how you can force a third party not to sell to your enemies. Maybe going to buy their stuff at higher prices. And make a deal to buy all they produce.
 

Ludak021

Posts: 753   +572
I don't know how you can force a third party not to sell to your enemies. Maybe going to buy their stuff at higher prices. And make a deal to buy all they produce.

Easy actually. You bully their costumers into not buying from them, their suppliers not to supply to them, bribe news agencies to slander them. Basically, just do what China and US already have been doing for decades.
edit: I forgot, you get Canada and UK to arrest their CEOs and other powerful individuals, seize their assets and so on. I think everyone knows the drill by now, whether they acknowledge it or not.
 

kira setsu

Posts: 407   +386
So why does ASML listen to the U.S.? and not sell the equipment?

if theyre the only ones who can make it then aren't they the ones with the actual upper hand? the only reason I can think of is that they dont want china to tear one down and hide behind the sanction show to keep it away from them.
 

mbrowne5061

Posts: 2,060   +1,280
So why does ASML listen to the U.S.? and not sell the equipment?

if theyre the only ones who can make it then aren't they the ones with the actual upper hand? the only reason I can think of is that they dont want china to tear one down and hide behind the sanction show to keep it away from them.

Because ASML has to listen their own government, and their government (along with most others) has signed various import/export treaties that restrict the trade of "dual use" items (under which, lithography machines fall).

The author of this article is making it sound like the US is full control here, when what really at play is ITAR and EAR (and other country's equivalent policies), and the various treaties around the world that support these policies.
 

Richard M

Posts: 19   +65
Blah blah blah, they can't prove China is spying and you can't prove they aren't spying. Obviously both sides are spying on each other as much as they can. Instead of talking about things we can't prove how about talking about more important things?

I got nothing against China, but why does every single product on earth have to be made in China? You talk about US interests, so explain to me how it's in any country's interest (other than China) to have every single thing manufactured there? Sure, we get cheap crappy merchandise that consumerists gobble up, but all this doesn't help anyone in the long run. Well, except China.

Why does every single product have to be made in China?

Because very few people are willing to pay more for made in the US products.

There is a reason that WalMart went from doing the "Made in the USA" thing back in the 80s to having mostly Chinese made products today. It is not because WalMart hates American made products, it is because people shopping at Walmart are not willing to pay an extra $1.99 for American made products.

Retailers stock the items that people will buy and US consumers have shown time and time again that price is more important than where the products are made or pretty much any other factor for that matter.

Most people say they want American made products but when it comes to what they actually do when it comes to spending money they vote for those cheap made in China products almost every time.

You see the same thing when it comes to WalMart putting small local retailers out of business.

Ask everyone and they say that they want to support local businesses. However when it comes to where they spend their money they run to WalMart for those cheap prices. Then they ***** and complain because those local businesses go out of business and yell at WalMart.
 

Porkous

Posts: 160   +50
So why does ASML listen to the U.S.? and not sell the equipment?

It was a YT video with a representative from ASML speaking in a broad manner about some key topics, one of them being why ASML has no competition.

Well, asml has a big chunk of exclusive suppliers and on that list, there are about a thousand, or so, in the US.
ASML is an intertwined company and its assembly lines distributed in about 60 locations across the word.
 
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Endymio

Posts: 1,838   +1,909
US have claimed time and again that China is spying through their hardware/ equipment. Yet after so many years, they have not been able to prove it.

...[In 2012, Australian intelligence officials informed their U.S. counterparts that they had detected a sophisticated intrusion into the country's telecommunications systems. It began, they said, with a software update from Huawei that was loaded with malicious code.

The breach and subsequent intelligence sharing was confirmed by nearly two dozen former national security officials who received briefings about the matter from Australian and U.S. agencies from 2012 to 2019. The incident substantiated suspicions in both countries that China used Huawei equipment as a conduit for espionage...

The update appeared legitimate, but it contained malicious code that worked much like a digital wiretap, reprogramming the infected equipment to record all the communications passing through it before sending the data to China...After a few days, that code deleted itself..."

 

alexnode

Posts: 92   +32
China looks like Japan in the 70s, I think that their primary objective is to turn production towards high quality, instead of cheap labour. I am not sure governmental sanctions will work because our whole supply is intertwined. How can you control things by limiting Dutch lithography companies ? How do you force other countries to use old tech ? Above all how do you force multinationals to do things that are less profitable ?