Chip makers need massive investment to cushion the impact of US sanctions.
China’s semiconductor manufacturers are in a difficult position due to US export restrictions. And it’s not just a lack of funds, but also a lack of access to advanced technologies, writes reuters.com.
In December 2022, Reuters reported that the government allocated $140 billion to purchase equipment for the production of chips. Perhaps these injections helped companies such as Shanghai Micro Electronics Equipment Group (SMEE). But money alone is not enough to catch up with Western competitors who are creating microelectronics that are generations ahead of the Chinese. SMEE and others like it mostly resell technology and raw materials to Chinese chipmakers, but they are unable to solve some of the engineering problems on their own, market analysts say.
Experts from Bernstein Research note that Chinese scientists are strong in the research field, but when it comes to translating ideas into reality, they face problems due to the lack of equipment, software, or even raw materials and some technologies.
Chip fabrication equipment manufacturers are working closely with customers to offer long-term services such as installation, calibration, maintenance and repair of machines, each of which can cost more than $100 million, the report says.
Ex-SMEE employees told Reuters that the effect of US sanctions was not felt so strongly, but until supply chains became so global and design became more complex, plus the monopoly in the field of lithography, ASML, agreed to support the White House in its seeking to limit China’s AI technology.
According to one former SMEE engineer, the company had to build the machines on its own by buying and researching used equipment and reading patents and public documents. The company managed to create a lithographic machine that could print chip patterns up to 90nm on silicon wafers, but SMEE was still two decades behind ASML. However, in China it was perceived as a breakthrough.
Since then, SMEE hasn’t made any significant progress, partly due to difficulties in acquiring equipment from overseas, an ex-employee commented.
“Even if we could build machines, we wouldn’t know how to maintain them,” he added.
A former top executive at a Chinese chip manufacturing equipment manufacturer described how, while working to master the etching process for 3D NAND flash memory, the company failed to improve on one critical element: channel size.
“We knew what was needed for this, but we were limited by the design capabilities of the equipment. Our American competitor had already solved this problem,” he shared.
In China, they are now trying to find other ways for the development of the semiconductor industry. Recently, two academics from the Chinese Academy of Sciences published an article calling for a reorientation of efforts towards research and development of new technologies and materials, rather than “imitation of existing foreign technologies.”
But at the same time, Chinese chip makers have become even more isolated after the United States imposed restrictions in October 2022 to prevent US companies such as Lam Research Corp. and Applied Materials Inc. supply equipment that can produce relatively advanced chips without a license.
“When we bought equipment, the main condition of the contracts was “customer service”. Now we can’t even get that because of the sanctions,” the source commented.
Earlier, Focus reported that Huawei was suspected of spying on visitors to the international exhibition Mobile World Congress 2023. The company handed out badges to people, in which very suspicious chips were later found.
They also wrote that deliveries of processors that can be used for the needs of the military-industrial complex are continuing in the Russian Federation. The chain was organized through third countries, namely: Turkey, the United Arab Emirates, Kazakhstan.
