China is catching up with cutting-edge semiconductor technology

he semiconductor industry in Chinese Mainland has improved its strength in cutting-edge fields. It is catching up with semiconductor technology in the fields of logic (computing) and memory chips, which are leading enterprises in Taiwan, South Korea, and the United States. In the field of basic research, it is also rapidly improving its sense of existence. The United States, which has strengthened its sense of crisis, launched extensive export controls on semiconductors and manufacturing equipment in October 2022. If the confrontation between China and the United States deepens, the semiconductor supply chain that is emerging from chaos may deepen the cracks again.





At the International Society "ISSCC" held in February, known as the "Semiconductor Olympics", the number of papers from selected countries and regions showed that Chinese Mainland surpassed the United States and South Korea, and jumped to the first place for the first time. The number of selected articles of universities has increased, and the share of Chinese Mainland has reached 29.8%, up sharply from 14.5% in 2022. In the field of basic research that affects the ability of medium and long-term technology development, the strength of semiconductor in Chinese Mainland is also steadily improving.

Represented by nano (nanometers are 1 billionth of a meter) level micro refinement technology, semiconductors require a high degree of industrial accumulation, from materials to manufacturing equipment. Chinese Mainland started late in manufacturing and design, but the number of enterprises in Chinese Mainland using performance and technology comparable to those of leading enterprises in various fields in Taiwan and South Korea is increasing.

A representative case is the NAND flash memory field for long-term storage. Samsung Electronics of South Korea, KIOXIA Corporation of Japan, and Micron Technology of the United States have been leading the way, but China's Yangtze River Storage Technology (YMTC) is rapidly catching up in technology.

From the perspective of flash memory, the formation of micro circuits is becoming increasingly difficult in structure. Storage cell layers are being stacked to improve storage density. In 2022, various enterprises successively produced more than 200 layers of products. In a November report, Canadian research company TechInsights stated, "As a product with more than 200 layers, we confirmed that the first product to be produced was Yangtze River Storage.". Although it is believed that there are topics such as profitability, it has kept up with the leading camp in terms of technology.

In the field of logic chips that undertake high-speed computing, enterprises in Chinese Mainland are also launching an offensive. In the indispensable GPU (graphics processor) field such as artificial intelligence (AI), BIRENTECH launched a new product in August, indicating that it has more than twice the speed performance compared to the "A100" of Nvidia in the United States.

Microrefinement technology also has the momentum to approach the most cutting-edge products. The products of the foundry enterprise SMIC adopting the "7 nm" technology have been confirmed. Now, it has caught up to the point where it is two generations behind the most cutting-edge product in mass production, "3 nanometers". As a OEM, it is second only to TSMC and Samsung Electronics.

In the face of Chinese Mainland, which has started to leap forward in semiconductor cutting-edge technology from research and development to circuit design and manufacturing capabilities, the United States is strengthening its crisis awareness.

US Impediments to the Development and Manufacturing of Chinese Chips

"Controlling the technological innovation and future of the United States, we will invest in industries that the Chinese government seeks to dominate." In his State of the Union address released on February 7th, US President Biden demonstrated the idea of confronting China, which strengthens the most cutting-edge technology. He stated that "in order to avoid the use of cutting-edge technology for purposes hostile to ours, we will cooperate (with allies)," referring to the consideration of semiconductor restrictions on China.

After 2018, the United States has continuously strengthened trade restrictions against China. Huawei Technologies and SMIC International have been included in the list of entities that have taken de facto embargo measures, and the content has been strengthened in stages. The regulations on China released in 2022 are more in-depth than before, posing obstacles to China's cutting-edge semiconductor development and manufacturing.

The focus is on the limitations of manufacturing equipment. The United States lists logic chips with technology generations below 14 to 16 nanometers, NAND flash memory with layers above 128, and equipment needed to manufacture cutting-edge semiconductors as export restrictions. The export of facilities for manufacturing cutting-edge products by large American equipment enterprises such as Applied Materials and Colin R&D is restricted. American technicians are also prohibited from participating in chip manufacturing locally, and the technicians supporting Chinese semiconductor companies have also been evacuated.

In addition, EDA (Electronic Design Automation) software, which is indispensable for semiconductor circuit design, has also become an object. American companies such as Synopsys and Cadence Design Systems form monopolies in the field of basic tools for drawing complex circuit diagrams and integrating manufacturing processes. Industry insiders say that if Chinese companies cannot take advantage of it, "they will lag behind in cutting-edge fields by nearly 10 years.".

This restriction is not only limited to American companies, but also restricts the trade of products using American technology. The Netherlands' ASML, which is an indispensable lithographic device for the formation of ultra-fine circuits, and Japan's Tokyo Electron, which has advantages in the field of thin film forming equipment, are also limited.

Japan is also involved

In addition, the United States has also indicated its negotiations with the Netherlands and Japan regarding restrictions on China. It is said that a certain consensus has been reached, and it is expected that the two countries will also maintain a consistent pace with the United States.

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

In February, the China Semiconductor Industry Association (CSIA) issued a statement regarding the regulatory measures in the United States, stating that it "opposes this attempt to exclude the Chinese semiconductor industry from the global industrial system and free market competition", pointing out that if Japan and the Netherlands follow, "it will cause long-term harm to the interests of global end consumers.".

China's cutting-edge semiconductor manufacturing is being hit by US regulations. After October 2022, American enterprises will restrict exports to Chinese Mainland and withdraw American technicians, resulting in the stagnation of the operation and investment of cutting-edge product factories in Chinese Mainland. The head of the Japan Semiconductor Manufacturing Equipment Association (SEAJ) stated that "there has been a significant decrease in exports to China since January.". Currently, there is still no compromise point in China's control.

China has been criticizing the United States since the tightening of controls in October 2022. In December, China's Ministry of Commerce announced that the United States had violated regulations and filed a lawsuit against the World Trade Organization. "This is a restrained response in accordance with international law," said Toshio Marutagawa, a professor of Chinese economics at the University of Tokyo, who believes that "it can be seen that for the sake of our semiconductor industry, we do not want to further expand decoupling.".

It is difficult for the US government and industry to fully unite in controlling Chinese semiconductors. In the face of extensive semiconductor regulation by the United States government, the Semiconductor Industry Association of the United States (SIA) expressed concern that "the uncertainty of the industry has increased unprecedentedly.". From the perspective of public consultation, various enterprises and groups in the industry have indicated that transactions outside of regulation may also shrink, and have requested that the scope of regulation be reduced.

But there is no sign that the United States is loosening its control over China. "Compared to the Trump regime, [the control over China] has been significantly strengthened. If the negotiations towards the end do not proceed smoothly, the confrontation between China and the United States is likely to deepen rapidly," said Nimitsu Nomaki, the chief researcher of Japan Comprehensive Research Institute.

For semiconductor manufacturing equipment in Chinese Mainland, Professor Marukawa Zhixiong of the University of Tokyo pointed out that "basically all processes are covered", but only power semiconductors used for current control and other products with mature technology are considered to be able to achieve a one-stop mass production.

Many views hold that at this stage, "it is almost impossible for China to catch up with the manufacturing level of the United States in terms of both cost and technology" (Masaki Noki).

China is investing heavily in the localization of semiconductors. The strengthening of regulations on manufacturing equipment and EDA may, on the contrary, accelerate the development of semiconductor technology in China.

The intensification of the confrontation between China and the United States implies the risk of instability in the semiconductor supply chain. In fact, the world's dependence on Chinese Mainland's semiconductor industry is not low.

If we turn our attention to non cutting-edge products known as "mature products" and "legacy products", China is considered to hold nearly 20% of the market share based on its manufacturing capacity. China is an indispensable supplier of chips used in a wide range of products such as automobiles, home appliances, and industrial equipment.

Although the United States has targeted semiconductor regulation in China as a cutting-edge field, if the opposition intensifies, it may affect the field of mature products. The semiconductor supply chain, which has been disrupted by the