“China and the US Compete in the Semiconductor War”

It is undeniable that the United States (US) consistently strives to maintain its technological hegemony. Various methods are employed to suppress foreign companies that surpass American firms or pose a threat to them. This has happened before with Japan’s semiconductor industry, France’s energy giants, and others.

In the 5G era, Huawei leads in 5G technology, holding the most patents worldwide and being the only company capable of providing comprehensive 5G services. Additionally, its 5G chip technology is also globally advanced.

As a result, the US has repeatedly altered chip regulations, restricting not only American chip companies like Qualcomm from shipping products but also limiting companies using American technology, such as TSMC and ASML, from supplying chips to China.

Meanwhile, Chinese companies like Huawei have accelerated the development of self-designed and self-produced chips and have begun developing RISCV-based chips to reduce reliance on American chips and other products.

Data shows that after US restrictions, Chinese domestic companies reduced chip imports by over 97 billion units in 2022. This number is expected to exceed 50 billion units in the first half of this year.

SMIC, China’s semiconductor manufacturer, announced it will have a production capacity of over 700,000 eight-inch equivalent wafers by the end of this year, which will be used to produce various types of chips. Capital expenditures for this year are projected to exceed $6.6 billion, primarily for capacity expansion and process upgrades.

Unexpectedly, the US, Japan, and the Netherlands signed a tripartite agreement to further restrict the export of advanced semiconductor equipment. Japan will begin limiting shipments of over 23 types of semiconductor equipment starting mid-July.

The Netherlands also officially announced restrictions on certain models of lithography machines, effective September 1. At that time, DUV lithography machines of the 2000i model and later will no longer be exportable.

However, the Netherlands and ASML have emphasized that while the tripartite agreement restricts certain DUV lithography models, the 1980i and earlier models can still be shipped, with a single-exposure accuracy of 38 nanometers.

Meanwhile, domestically produced lithography machines in China have achieved a breakthrough of 90 nanometers and can fully support the production of mature-process chips.

Shanghai Microelectronics’ 28-nanometer precision lithography machine has also completed technical validation, with mass production expected soon. The key is that Chinese manufacturers are accelerating the expansion of chip production using sub-28-nanometer processes and the required lithography machine models that ASML cannot supply.

This will further accelerate breakthroughs by Chinese manufacturers, as some European media have claimed that the situation is dire due to increasing US restrictions on ASML lithography exports.

This not only speeds up China’s breakthroughs but also causes European chip and semiconductor companies to lose further advantages.
First, Europe lacks inherent global dominance in chips and semiconductors, with only a few leading companies like ASML, ARM, and STMicroelectronics.

After the chip rule modifications, even ARM and STMicroelectronics can no longer freely export their products, leaving only ASML able to ship certain DUV lithography models.

Now, with ASML facing increasing export restrictions, this is not good news for Europe’s semiconductor industry. Moreover, most American chip and semiconductor companies can still continue exporting their products. Qualcomm can still supply 4G chips, while Nvidia’s export license extension may already be resolved. Companies like Lam Research and Clack have received clarification notices on the rules and can still ship related products.

Second, after the chip rule changes, Huawei announced its full entry into the chip and semiconductor sector, investing heavily in China’s domestic chip industry chain through a 440-billion-yuan high-silicon initiative.

Within three years, Huawei has not only built a complete smartphone industry chain in China but also achieved localization of 14-nanometer and above EDA tools. It has collaborated with SMIC to accelerate advanced process localization, reducing reliance on American technology.

This has caused ASML’s market share in China to drop from 14% to 8%. After the tripartite agreement signing, reactions from Chinese companies like Huawei and SMIC have been relatively calm, indicating significant breakthroughs in lithography machine technology.

The key is that ASML’s president has stated that further restrictions will continue to erode its market share in China and may even lead to a withdrawal from the Chinese market.

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