He Jun*
In recent years, the U.S. has been pushing harder to curb the development of China’s semiconductor industry. It not only carefully designed the key parts of the bottleneck and the implementation sequence of its strategy but also drove its allies to participate in it. Compared with the simpler and more direct means of Donald Trump’s era, the Biden administration’s strategies and actions to contain China’s semiconductor industry are more systematic and precise, as well as more carefully designed.
Since last year, the U.S. government has made substantial progress at three important points. (1) In August 2022, President Biden signed the CHIPS and Science Act, making a systematic plan for the development of the semiconductor industry in the U.S. and attracting semiconductor companies to invest in the country with huge financial subsidies. (2) On October 7, 2022, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce issued export control measures for semiconductors to China, imposing strict restrictions on chip manufacturing equipment, talents, corporate services, technology, and products. (3) On January 29, 2023, the U.S. reached an agreement with the Netherlands and Japan to restrict the sale of chip manufacturing equipment and key materials to China.
The semiconductor industry is the core industry and driving industry in the information age, and there is an obvious technological gap between China and the West in this field. The moves to restrict the development of China’s semiconductor industry are carefully deliberated by the U.S. after adjusting its strategy. Through suppressing the semiconductor industry, the U.S. has effectively gained the upper hand to undermine China’s progress of modernization through its technological weakness. It is certain that after the U.S.-Japan-Netherlands agreement, measures to restrain China’s semiconductor industry will be tightened even more.
Such a measure imposed by the U.S. right after the Lunar New Year has aroused deep concerns in China. Researchers at ANBOUND found that these concerns mainly focus on two aspects: First, the impact of the restrictive agreement on China’s semiconductor industry, and second, the countermeasure of China’s semiconductor industry. As it stands, the second concern is highly complex, and ANBOUND’s research team will conduct targeted and specialized research on it in the future. In this paper, we only analyze the impact of the relevant agreement.
First of all, the measures this time is to fill in the gaps and upgrade the previous unilateral restrictive measures of the U.S. In 2018, the U.S. government successfully lobbied the Dutch government to ban ASML from exporting EUV lithography machines to China, which cut off China’s access to advanced chip manufacturing processes of 7nm and below. Since then, the Chinese industry has pinned its hopes on some of the more advanced DUV products, namely ArFi, to achieve 14nm or even more advanced processes through process improvement. The agreement reached by the three countries this time will not only completely block the possibility of China’s realization of advanced technology chip manufacturing below 14nm, but will also expand the control precision to 38nm. This is equivalent to raising the scope of sanctions against China significantly. Combined with the previous sanctions imposed by the U.S., the restrictions in the past were only partially effective, yet this time the measure taken will carry much stronger implications.
Second, the trilateral agreement could have a major impact on the Semiconductor Manufacturing International Corporation (SMIC), the largest chipmaker in mainland China, considered to be the benchmark of the country’s chip manufacturing industry. Public information shows that SMIC has achieved risky mass production of 14nm chip technology as early as 2019. However, due to insufficient product yield, it has not been able to achieve market-oriented mass production. In the past two years, SMIC announced that it will invest heavily in building four wafer production lines in Beijing, Shanghai, Tianjin, and Shenzhen to expand production capacity including 28nm chips. However, under the backdrop of the escalation of restrictions on China in the three-nation agreement, SMIC may encounter great difficulties in its investment and production expansion plan. After curbing SMIC’s production capacity, the demand for 14nm to 38nm chips in mainland China can only be purchased from outside of the country.
Finally, the trilateral agreement provides flexibility for the U.S. to continue expanding the scope of sanctions, bringing great possible risks to China’s semiconductor industry. After the agreement was reached, no specific details of the agreement are announced. However, ASML said in a statement that it will focus on advanced chip manufacturing technologies, including but not limited to advanced process lithography systems. Changes, including key components, key materials (photoresist, large silicon wafers), and important software in the chip manufacturing industry are included in this scope. This means that there might be multiple other moves to come. We believe that the U.S. has drawn up a list of sanctions to suppress China’s semiconductor industry in a wider range of fields in the future. The agreement provides an effective tool for it to impose such sanctions, and it will be up to the U.S. to act.
It should be pointed out that in the past two years, unilateral sanctions imposed by the U.S., coupled with the extended sanctions provided by the recent tripartite agreement, Western countries have established a set of systematic restrictions on China’s semiconductor industry. To break through such sanctions, China’s semiconductor industry and enterprises will not only need to bypass singular restrictions but also well-designed systematic suppression. This will set up many insurmountable high walls for the localization or autonomy of the country’s semiconductor industry. In addition, the semiconductor industry will also need to achieve sustained commercial success in an open market, and not solely rely on the state. In this regard, the country, industry, enterprises, and market may all need to prepare for the long-term challenges ahead. Related goals, development strategies, policies, and resource investment all need to be carried out around such a long period of development.
Final analysis conclusion:
The United States, the Netherlands, and Japan have reached an agreement to restrict the sale of chip manufacturing equipment to China, which has brought new difficulties, new risks, and new challenges to the survival and development of the country’s semiconductor industry. As a result, China will need to adjust its development goals and strategies, as well as be prepared for long-term challenges ahead.
He Jun is a researcher at ANBOUND
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