China surges ahead in cutting-edge semiconductor technology

International Business News  –  The semiconductor industry in mainland China is raising its strength in cutting-edge fields. It is catching up in semiconductor technology in the areas of logic (computing) and memory chips, where Taiwanese, South Korean and U.S. companies lead, and is rapidly increasing its presence in basic research. Strengthening its sense of crisis, the U.S. launched broad export controls on semiconductors and manufacturing equipment in October 2022. If the confrontation between the U.S. and China deepens, the semiconductor supply chain, which is emerging from chaos, is likely to deepen the rift again.

At the ISSCC, an international society known as the “Olympics of Semiconductors,” held in February, China surpassed the U.S. and South Korea for the first time in terms of the number of papers selected from each country and region. The number of selected papers from universities has increased, with mainland China’s share reaching 29.8%, a significant increase from 14.5% in 2022. In the area of basic research, which affects the ability to develop technology in the medium to long term, the strength of semiconductors in mainland China is also steadily increasing.

Represented by microfabrication technologies at the nanometer (nanometer is 1 billionth of a meter) level, semiconductors require a high degree of industrial accumulation, from materials to manufacturing equipment. Mainland China is a late starter in manufacturing and design, but the number of Chinese companies adopting performance and technologies comparable to those of US, Taiwan and Korean leaders in various fields is increasing.

The representative case is in the field of NAND-type flash memory for long-term storage. Korea’s Samsung Electronics, Japan’s Armor (KIOXIA Corporation) and U.S. Micron Technology have been leading the way, but China’s Yangtze Storage Technology (YMTC) is rapidly catching up in terms of technology.

In flash memory, the formation of tiny circuits is becoming structurally difficult, and layers of memory cells are being stacked to increase memory density. TechInsights, a Canadian research firm, said in a report in November that “we have identified Changjiang Storage as the first product with more than 200 layers in 2022.” Although the company is considered to have problems such as profitability, it has caught up with the leading camp in terms of technology.

Chinese companies are also making aggressive moves in logic chips, which are used for high-speed computing. BIRENTECH unveiled a new product in August that is more than twice as fast as Nvidia’s A100, which is indispensable in the field of GPU (graphics processing unit) such as artificial intelligence.

Micro-refinement technology is also gaining momentum towards the most sophisticated products. Semiconductor Manufacturing International (SMIC), a contract manufacturer, has been confirmed to have a product using the “7nm” technology. Now, the company is two generations behind the state-of-the-art product 3 Nano, which has been mass-produced, and is second only to Taiwan Semiconductor Manufacturing and Samsung Electronics as a contract manufacturer.

In the face of China, which is advancing advanced semiconductor technology from research and development to circuit design and manufacturing capabilities, the U.S. is strengthening its sense of crisis.

The United States is blocking the development of Chinese chip manufacturing

The focus is on the limitations of manufacturing equipment. The U.S. imposed export restrictions on logic chips with a technology generation of 14 to 16 nanometers, NAND flash memory with more than 128 layers, and equipment needed to manufacture advanced semiconductors. Large U.S. equipment companies, such as Applied Materials and Corin R&D, are subject to restrictions on the export of facilities for manufacturing cutting-edge products.

In addition, EDA (electronic design Automation) software, which is indispensable for semiconductor circuit design, is also a target. Us companies such as Synopsys and Cadence Design Systems have a monopoly on the basic tools used to draw complex circuit diagrams and incorporate them into manufacturing processes. An industry source said that if Chinese companies fail to take advantage of it, they will lag behind in cutting-edge fields by nearly 10 years.

The restrictions are not limited to American companies, but also restrict trade in products that use American technology. ASML of the Netherlands, which is indispensable for the formation of ultrafine circuits, and Tokyo Electron of Japan, which is strong in the field of thin-film formation equipment, are also limited.

Japan is also involved

In addition, the United States has also made representations with the Netherlands and Japan regarding restrictions on China. Some consensus is said to have been reached, and the two countries are expected to keep pace with the United States.

According to the International Trade Center, 60 percent of China’s semiconductor equipment imports (including Hong Kong, about $42.8 billion in 2021) are from Japan, the United States and Europe.

The China Semiconductor Industry Association (CSIA) issued a statement in February in response to the US regulation, saying that it “opposes the attempt to exclude China’s semiconductor industry from free competition in the global industrial system and market”, noting that if Japan and the Netherlands follow suit, “it will cause long-term harm to the interests of global final consumers”.

The export of equipment is controlled, and it is difficult for mainland China to independently mass produce

China’s cutting-edge semiconductor manufacturing industry is suffering due to U.S. regulations. Since October 2022, U.S. companies have restricted exports to the Chinese mainland and withdrawn American technicians, which has stalled the operation and investment of high-tech factories in the Chinese mainland. “Exports to China have decreased significantly since January,” said an official at the Japan Semiconductor Manufacturing Equipment Association.

China has criticized the United States since the controls were tightened in October 2022. China’s Ministry of Commerce filed a complaint at the World Trade Organisation in December, saying the US had violated regulations. Tomiao Marukawa, a professor at the University of Tokyo who studies the Chinese economy, said, “This is a restrained response in line with international law,” adding, “We can see that we do not want further decoupling for the sake of our semiconductor industry.”

It is difficult for the U.S. government and the industry to fully unite on the control of Chinese semiconductors. The Semiconductor Industry Association (SIA) expressed concern over the U.S. government’s sweeping regulation of semiconductors, saying, “Uncertainty in the industry has increased as never before.” According to the public consultation, companies and organizations in the industry are demanding that the scope of regulation be reduced, saying that non-regulated transactions may also be reduced.

But there is no sign of the US loosening its grip on China. Minoru Noki, senior researcher at the Japan Institute of Research, said, “Compared to the Trump administration, regulations (on China) have been significantly tightened. If the negotiations toward a conclusion do not go smoothly, the confrontation between the U.S. and China could deepen rapidly.

Regarding semiconductor manufacturing equipment in mainland China, Professor Chio Marukawa of the University of Tokyo pointed out that “basically all processes are covered,” but only products with mature technologies such as power semiconductors for current control are considered to be fully autonomous for one-stop mass production.

Many people believe that at this stage, “it is almost impossible for China to catch up with the U.S. manufacturing level in terms of cost and technology” (Minoru Nogi).

China is making huge investments to achieve localization of semiconductors. The tightening of controls on manufacturing equipment and EDA, etc. is likely to accelerate the development of Chinese semiconductor technology instead.

The intensification of the confrontation between the U.S. and China carries the risk of destabilizing the semiconductor supply chain. In fact, the world’s dependence on mainland China’s semiconductor industry is not low.

If we turn our attention to the non-advanced products called “mature products” and “legacy products,” China is considered to hold nearly 20% of the share by manufacturing capacity. China is an indispensable supplier of chips used in a wide range of products, including automobiles, home appliances and industrial equipment.

Although the U.S. is targeting China’s semiconductor control on cutting-edge areas, if the confrontation intensifies, it may spread to areas of mature products. The semiconductor supply chain, which has been disrupted by the new crown outbreak, is currently on a dangerous balance.