The semiconductor landscape is shifting rapidly as new US export controls target China’s chip-making industry. These comprehensive changes, detailed in a 121-page report by the US Bureau of Industry and Security, now include chip-making tools essential for creating 45-nanometre node chips or even more refined versions. This spells potential challenges for China’s well-established semiconductor sector.
Key among the restricted items are the advanced lithography tools vital for etching and film deposition. The significance of this restriction becomes apparent when considering the role of ASML Holdings, a Dutch company, in the global semiconductor supply chain. ASML, as the sole producer of certain advanced lithography equipment, plays a pivotal role in the production of the world’s most sophisticated semiconductors. The company’s flagship product, the Twinscan NXT1980Di immersion lithography machine, launched in 2015, is proficient in producing chips at the 40-nm mark and below, churning out up to 275 wafers every hour. This machine is not just any tool, but an integral one for numerous Chinese manufacturers, bridging both advanced and traditional semiconductor fabrication.
Peter Wennink, CEO of ASML, addressed the implications of these controls during an earnings discussion. He confirmed that the 1980Di model could be ensnared by the new export restrictions, albeit under specific conditions. While it may affect some high-tech Chinese semiconductor factories, a vast portion of ASML’s Chinese clientele would remain untouched by these limitations.
Despite the clear potential hindrance, ASML is in the process of seeking further clarity regarding these updated rules from the US administration.
Jan-Peter Kleinhans, a noted expert from the Berlin-based think tank, Stiftung Neue Verantwortung (SNV), emphasized the international ramifications. He pointed out the timing of the US’s decision, which comes shortly after the Dutch government’s own set of export controls. The varying approaches underscore a divergence in how both countries perceive risks in the sector.
The implications for China are significant. Approximately 46% of ASML’s lithography unit sales in the recent quarter were credited to Chinese purchases. Given the string of US sanctions that have curtailed China’s access to high-tech US chips and equipment, China has gradually leaned into mature chip production.
Insiders suggest the ban on 1980Di machines might heavily weigh on foundries within China. Notably, Semiconductor Manufacturing International Corp (SMIC), China’s primary foundry for advanced chips, might face challenges. The company, already under scrutiny for its advanced chip tech rumored to be inside Huawei’s latest 5G smartphone, will need to navigate this tightened export terrain.
This isn’t the first time China’s semiconductor ambitions have been hampered. Prior sanctions have already blocked China from procuring ASML’s state-of-the-art EUV lithography machines since 2019. Moreover, Dutch export controls, effective January 2024, will further prevent ASML from shipping its cutting-edge 2000-series machines to China.
Such restrictions have prompted a strategic shift. Chinese chip manufacturers, notably SMIC, are ramping up their mature node capacity development. Research from TrendForce suggests a surge in China’s mature chip-making capacity over the next few years, propelled by industry leaders like SMIC, HuaHong Group, and Nexchip. Conversely, Taiwan, a semiconductor heavyweight, may witness a decrease in its mature chip market share.
In a landscape where technological supremacy and geopolitical tussles intersect, these updated export controls may recalibrate the balance of power in the global semiconductor industry.