Hundreds of China’s Semiconductor Production Lines Risk Being Delayed or Shelved

Recently, Japan and the Netherlands They agreed to join with the United States to restrict semiconductor manufacturing equipment from China. The three countries together account for 90% of the global market in semiconductor equipment. This union is expected to deal a serious blow to China’s chip industry.

Japan and the Netherlands said that the restrictions are necessary for national security. The CCP mouthpiece Global Times reported on the news that China was building 100 chip manufacturing plants per year. However, due to U.S. sanctions, this could mean that the construction of these plants may be delayed or halted. According to the report, Chinese manufacturers should expect the worst at this point.

The Semiconductor industry Association (SIA) data shows that the United States accounted to 41 percent of the global output value for semiconductor equipment manufacturing in 2019. Japan accounted 32 percent, and Europe (mainly ASML in the Netherlands) accounted 18 percent. These three countries together make up 90 percent of the global market. The joint export restrictions will have wide-reaching consequences.

The chairman of a Japanese tech company spoke to The Epoch Times under the pseudonym Desen Li on February 6, 2012. The three countries could work together to strike a blow at Chinese semiconductor manufacturing.

“The most critical blow is in the field of photolithography after the three countries join hands,” Li. Because China won’t export deep ultraviolet (DUV), and extreme ultraviolet (EUV), lithography, it will prove difficult for Chinese chip firms to increase their production capacity over a prolonged period of time. China’s existing Lithography is at risk because important components are dependent upon imports. Regular maintenance becomes impossible, he stated.

The U.S.’s October 2013 semiconductor export control orders mainly targets advanced technologies, equipment and equipment lower than 14 nanometers. The sanctions will likely be extended to mature processes, such as low- and medium-range photolithography, following the alliance with Japan and the Netherlands.

There is no way to separate chip manufacturing and lithography. At the moment, the global market for lithography is dominated by three companies: ASML of the Netherlands and Nikon and Canon of Japan. According to data, ASML held 63 percent of the market share in 2020. Canon had 30 percent and Nikon had 7 percent. U.S. manufacturers make up half of ASML’s 17 major suppliers.

The U.S. is the market leader in semiconductor equipment, especially in five areas that are critical to the market: deposition, etching and cleaning, process control, testing, and process control. Together, they accounted for over half of the global market. South Korea accounts for 4 per cent of global semiconductor equipment production, but it has yet to decide whether or not to join the U.S. sanction. In the long-term, however, South Korea will likely continue to be subject to U.S. export restrictions to ensure that it has access to U.S. technology.

Japanese manufacturers believe that it is essential to partner with the United States regarding chips policy. According to Kyodo News Japan on February 5, Rapidus, a leading Japanese semiconductor manufacturer, stated that Japan’s semiconductor production and development capabilities are 10-20 years behind the highest level. It also said that collaboration with IBM and other U.S. companies is crucial to acquire the latest technology. This underscores the importance of Japan and U.S. cooperation.

Chinese Manufacturers Struggle To Buy Equipment

Since they are not involved in high-tech equipment and technologies, the U.S. semiconductor restrictions announced last October were temporary exempted from most Chinese semiconductor producers. Chinese semiconductor producers may be subject to more restrictive equipment restrictions, however, as the Japanese, Dutch and other counterparts join the United States. This has led to Chinese chip makers increasing their speed in procuring manufacturing equipment.

According to DigiTimes reports, some Chinese semiconductor producers are purchasing used manufacturing equipment. Others were looking for banned equipment in order to circumvent U.S. sanctions.

SMIC declared last November that it would increase spending to $1.6 billion and raise upfront payment on equipment orders in order for the company to deliver equipment for its major projects. This includes three new major manufacturing plants in China. SMIC’s construction, future development and operation of the three plants would be greatly affected if sanctions were extended to mature process machinery.

Yangtze Memory Technologies is another Chinese storage chip company giant that has issued at least 20 tenders after the U.S. sanction. This was in an effort to find new suppliers. After the U.S. sanctions were made public, U.S. semiconductor equipment suppliers stopped installing new equipment at Yangtze’s manufacturing plant. They also removed dozens of workers from the facility. Yangtze Memory Technologies was unable to provide technical support or maintenance for any equipment that was already in place.

China may spend decades catching up

Global Times, a mouthpiece of the CCP, published a late January article acknowledging that China’s semiconductor industry is facing technical and international political difficulties.

Global Times’ article stated that China’s current self dependence rate on its semiconductor equipment is below 20 percent. Technology lack has been the major stumblingblock in China’s growth of the semiconductor industry.

China’s semiconductor industry faces two major technological challenges and political issues. Technology-wise, Chinese semiconductor products tend to be low-end. China must import many high-end products each year due to the gap in advanced technologies. This includes CPU, GPU, memory and other semiconductor products.

On the political front the CCP is under intense pressure from the United States of America and its allies. The U.S. government wants to move American chip makers to the United States and South Korea, as well as to Japan, Taiwan, South Korea, Japan, and South Korea. It is also working with its allies in order to limit China’s development of semiconductors.

The Epoch Times was told by Li that it was impossible for the CCP’s to catch up in technology under these sanctions. The CCP does not respect intellectual propriety and seeks industrial advancement through clandestine methods.

China’s extreme three-year period “Zero-COVID” Public policy was costly and the end result was that the government had to stop the severe lockdowns. The gap between China’s semiconductor industry, and the rest of the world is only going to widen without western technology and talent. He said that the CCP is basically helpless against sanctions and that the regime is using more military threats in order to counter the West.