The advancement of semiconductors in China

Semiconductor Manufacturing International Corporation (SMIC), China’s largest chipmaker, appears to have made a breakthrough.

TechInsight, a Canadian technology media outlet, has revealed that SMIC has advanced its technology to a process of almost 7 nanometers (nm), which could be a stepping stone to a true 7nm process. According to TechInsight, SMIC products made using the quasi-7nm process have been on the market for a year. Some media outlets claimed that SMIC’s breakthrough showed that the US blockade. it was too little, too late and outdated.

The most advanced chip process node that SMIC has successfully done in the past has been 14nm, although it has always made strong attempts to move towards an advanced process node (below 10nm). However, due to the inclusion of SMIC in the entity list by the US Bureau of Industry and Security in December 2020, which was designed to limit SMIC’s ability to reach advanced technology nodes 10 nanometers or smaller, has been blocked from obtaining ultraviolet lithography machines (EUV) required by ASML of the Netherlands.

The use of an EUV machine is not necessary, in theory, to perform the advanced process nodes. Taiwan Semiconductor Manufacturing Company (TSMC), a world leader in semiconductor manufacturing, used deep ultraviolet lithography (DUV) machines in the initial phase of its 7nm volume production. But using DUV machines requires more layers of masks, which means longer exposure times and more complexity. This will result in a lower rate of return and a higher cost per chip, making this process commercially unfeasible today.

SMIC has advanced its technology to a process of almost 7 nanometers

But the semiconductor industry is of strategic importance to China. Having the ability to manufacture advanced chips is more important than the prices of these chips. It seems that SMIC is moving forward in using this older technology to achieve technological advances. In October 2020, it was reported that SMIC had successfully developed “almost 7nm” chips with the FinFET N+1 process using DUV machines.

Samsung breaks ground on new semiconductor complex

TSMC President Dr. Mark Liu said that the 7nm process it was a full node breakthrough and a milestone in semiconductor manufacturing. The biggest difference between the 7nm and 14nm processes is that the number of transistors per unit area of ​​the 7nm process is greatly increased and its power consumption is substantially reduced. This makes 7nm chips much more powerful than 14nm chips, but also cheaper.

For example, in 2020, the cost of a 7nm chip was $233, which was not only lower than the $331 cost of a 16nm chip, but also lower than the $238 cost of a 5nm chip. In addition, the performance of NVIDIA’s A100 Tensor Core data center processor, which uses TSMC’s 7nm process, has been increased 20-fold, so that the data center, which originally required 25 racks, can be reduced to a single rack. .

In other words, 7nm chips not only lower the cost of ownership, but also deliver high computing performance, making AI, cloud computing, and 5G economically viable in both enterprise and military applications.

China’s semiconductor industry rushes to improve its self-sufficiency

There is a large gap between chip consumption and chip manufacturing in China, which means that its chip self-sufficiency rate is low. In 2021, the size of China’s semiconductor market it was about 186.5 billion dollars, of which only 31.2 billion dollars were manufactured in China, both by foreign and domestic companies, which implies a self-sufficiency rate of 16.7%. Furthermore, only $12.3 billion worth of chips were made by companies based in China, accounting for only 6.6% of national consumption.

Having the ability to manufacture advanced chips is more important than the prices of these chips

To reach the goal set by the “Made in China 2025” initiative, a self-sufficiency rate of 75% by 2030 needs to be achieved. Under such pressure, it is not hard to understand why China has subsidized semiconductor companies to build factories. through various political incentives. Although there are notorious cases of “unfinished factories” in the development of the semiconductor industry, the failure has not caused China to withdraw from its policy of fully supporting semiconductor factories.

The experience of the development of the electronics industry in the past has made Chinese political planners understand that although the Chinese semiconductor industry lags behind foreign manufacturers in terms of its production scale and technology, there are two effects that will urge China to support a large number of semiconductor companies through policies. First, a large number of Chinese manufacturers may “eat up” the market and compress the space for second-tier and third-tier wafer foundries.

According to a reportBy the end of 2024, China will lead the world in building 31 new chip factories, surpassing Taiwan’s 19 and the United States’ 12. Since most of China’s 31 new factories will manufacture mature process nodes, the impact on major manufacturers such as TSMC, Intel and Samsung, which use advanced processes, is minimal. However, China’s “sea of ​​factories” tactic may put enormous pressure on other mature process manufacturers.

Given that excess inventory has emerged in some areas of the electronics industry, and the market expects there to be excess production capacity in chip manufacturing after 2023, price competition is inevitable. Foundries using mature processes will not be able to compete with Chinese semiconductor factories that enjoy significant political subsidies. Some second-tier and third-tier foundries may have to withdraw from the market, allowing Chinese foundries to dominate the mature process market.

Second, if one or two Chinese companies can stand out from the large number of subsidized smelters, there is hope that this “national champion” can compete or even dominate the market for advanced processes. Lenovo, in the PC/laptop sector, and Huawei and ZTE, in the communications sector, developed with this model. And SMIC may be the leading Chinese company that can compete in the international arena of advanced semiconductors and break the technological dominance established by the United States. The 7nm breakthrough discovered by TechInsight is the best proof.

by the end of 2024, China will lead the world in building 31 new chip factories, surpassing Taiwan’s 19 and the United States’ 12

In the past, Chinese chip design companies were sanctioned by the United States and could not use TSMC’s advanced process to launch new products. If SMIC can scale up the 7nm process for use in other Chinese manufacturers’ products, it will enable China to accelerate its advancement in AI, high-speed computing, and 5G, etc. The acceleration will enable China to achieve its goal of going from being a “manufacturing giant” to a “global manufacturing powerhouse.”

The effectiveness of the entity list needs to be reassessed

We currently know very little about SMIC’s 7nm shipments, throughput rates and pricing; it is not even clear if there are other applications. However, the advancement of the 7nm process is expected to allow China to make breakthroughs in artificial intelligence and high-speed computing. In turn, that will also increase China’s economic and military threats not only to Taiwan, but to all of East Asia.

China has set itself the goal of achieving “comprehensive modernization” based on “computerization,” “intelligence,” and “mechanization” by the centenary of the People’s Liberation Army in 2027. Advances in AI, quantum computing, and hypersonics require the help of advanced chips. Merely blocking China’s acquisition of EUV machines will not prevent the country from advancing in the field of advanced process chips, which will ultimately contribute to its military development. More efforts are needed.

The United States is trying to put diplomatic pressure on Japan and the Netherlands to expand the current EUV embargo to include DUV machines. Some may argue that isolating China will only hasten its march toward self-sufficiency. Because of China’s history of industrialization, his ambition will not stop until the country dominates the entire market. Therefore, limiting only China’s procurement of EUV machines will not serve the original purpose of preventing the country from manufacturing high-tech nodes of 10nm or less.

Note: The article was originally published in English in The Diplomat. The reproduction of the same in Spanish is made with the due authorization. Link to original article: https://thediplomat.com/2022/08/chinas-semiconductor-breakthrough/