Microelectronics and Rare Earth Elements Sectors

Bogeyman 

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The world is hungry for semiconductors, and not all of them need to be made with cutting-edge technology. The race is on to find older machines that can still crank out chips.​



Stephen Howe is a dealer of expensive antiques of almost unfathomable mechanical complexity that are much sought-after by a discerning and deep-pocketed clientele hailing from nearly every part of the developed world. The need for his wares is at an all-time high, and yet he’s feeling glum: Demand has so outstripped supply that it’s almost impossible for him to get hold of items to sell.

Mr. Howe buys and sells not vintage watches or classic cars but the equipment that makes the microchips that have been so scarce lately. The machines he sells tend to be at least 10 years old, since that’s about how long the best-capitalized chip manufacturers—like Samsung, Intel INTC 0.59% and Taiwan Semiconductor Manufacturing TSM 1.29% —hold onto new chip-making equipment. But they can be much older.
The great chip shortage of 2020 and 2021 has crimped the world’s ability to produce everything from automobiles to smartphones. And according to many analysts and semiconductor makers, as well as Mr. Howe, the lack of secondhand equipment for making microchips is one reason the chip shortage has become so acute.

We typically associate microchips with the latest and greatest technology, but it turns out that most of the chips that go into the products we use are made with older manufacturing techniques. No one knows precisely what proportion of the world’s microchips is made on used equipment, but Mr. Howe, owner of SDI Fabsurplus, estimates it might be as much as a third.

More than half the global semiconductor industry’s revenue comes from these older types of chips, says Wayne Lam, director of research at CCS Insight, a technology advisory firm. This, despite the fact that these chips are individually much less expensive than the high-end processors that are the “brains” of smartphones and laptops. A new, advanced Intel laptop processor chip costs hundreds of dollars. In contrast, many of these older-generation chips cost just a few dollars; some as little as pennies.


These chips that use more mature technology go into cameras and other sensors in our phones and cars; power-handling electronics; the logic controllers of factory equipment; the chips that enable wireless communication. It’s a shortage of these chips that is at the root of shutdowns of automobile manufacturing and Apple’s inability to meet demand for the latest iPhone, alike.

The pandemic helped trigger current chip shortages, prompting both shutdowns of factories that are critical to the manufacturing and packaging of these chips and a surge in demand for work-from-home gear and other products that use them. But that is just part of the story.

A longer-term trend, of expanding and insatiable demand for microchips in every electronic device you can name, has for years been taking slack out of the supply chains for the equipment at the heart of the supply chain for microchips.

Mr. Howe, who started his company in 1998, says that typically the semiconductor industry has gone through cycles of boom and bust that by turns fill and then empty his warehouses, which are located in Italy, Malaysia and Texas. But starting in 2016, demand for both new and used equipment for making chips has only grown, he says.

im-429955

im-429952


That swelling demand is due in part to the growth of the “Internet of Things” over the past five or so years, says Hassane El-Khoury, chief executive of Onsemi, a Phoenix, Ariz.-based semiconductor manufacturer that specializes in power and sensing technologies for automotive and industrial applications.

It’s not just that so much of what we buy these days has a chip in it—it’s also that some of those things have many more chips than ever before. For Onsemi, the dollar value of microchips in an electric vehicle with a driver assist system is 30 times as much as the cost of the chips in a gas-powered vehicle without such a system, says Mr. El-Khoury. Chip demand also flows from the rise in popularity of mobile devices and the need for many more servers—aka cloud-computing infrastructure—to support it.

In the second quarter of 2021, the latest for which data are available, the semiconductor industry sold more chips than at any point in history, according to the Semiconductor Industry Association.

Chip manufacturers are responding to all this demand by pledging to make more chips than ever, but ramping up manufacturing of the kinds of chips that so many companies need right now is difficult or impossible, for a number of reasons.

One is that expanding the capacity of a fab—the factory in which microchips are made—takes months even under the best of circumstances, in part because of the almost unbelievable complexity of making chips—even those using somewhat older technology.

OG-GB858_4b32f5_300PX_20211105125724.jpg

Sources: Semiconductor Industry Association; World Semiconductor Trade Statistics


Making a chip with cutting-edge technology, on 12-inch circles of pure, crystalline silicon known as “wafers,” requires lasers so precise they can create features on microchips just five nanometers, or billionths of a meter, thick—only slightly larger than the width of a single strand of DNA. Those chips, which include the processors that Apple and Samsung tout whenever they come out with a new phone, may require more than 1,000 passes through different machines inside a chip-making factory, says Jamie Potter, CEO of Flexciton, a startup that makes software to help chip makers optimize their manufacturing plans.


Making chips based on older technology involves 8-inch wafers and circuitry many multiples thicker, but still requires up to 300 passes through one sort of machine or another, adds Mr. Potter.

This level of complexity means that even if a startup or less-experienced chip manufacturer can obtain chip-making equipment—China has been subsidizing domestic chip manufacturers of this sort for over a decade—it may not be able to make chips well enough to make a profit. Even the best chip manufacturers throw out on average 10% of the chips they make, and getting the percentage that low requires considerable technical expertise.

As the chip shortage has grown acute, bidding wars for used equipment have spiraled, says Mr. Howe. For example, a Canon FPA3000i4, a piece of lithography equipment manufactured in 1995, which is used to etch circuits in chips, was worth as little as $100,000 in October 2014, and today goes for $1.7 million, he adds.

Potential buyers are now left with a difficult choice if they want to expand their capacity to make older chips: either pay exorbitant prices for old equipment, assuming they can even find it, or get on a waiting list for new equipment, which often stretches to six months and beyond.

TSMC is expanding its capacity to make older chips by building a new plant for that purpose in Japan. Intel has no plans to build new capacity for manufacturing older kinds of chips, and continues to concentrate on making bleeding-edge chips, says Lisa Spelman, a vice president in Intel’s data-center group.

Continuing to build more fabs that make the newest generations of chips could help alleviate the chip shortage by creating more global capacity overall, she adds. But taking advantage of that newer capacity requires manufacturers to migrate their designs for chips from the older technology to the newer kind, says Gaurav Gupta, an analyst at Gartner covering semiconductors and electronics. This is expensive and takes time, in part because manufacturers of chips for automobiles, for example, must verify the longevity and safety of their chips every time they come out with a new generation of them. Intel has set up a team to help automakers transition to newer chip tech.


im-429958

A manufacturing operator in a controlled light environment at Onsemi manufacturing facility. The yellow lighting is used to prevent unwanted exposure of photosensitive materials to light of shorter wavelengths.



In products where the technology has been certified for safety and durability, older chip tech is favored, says a spokeswoman for Infineon, which manufactures a variety of chips for the automotive industry. The electronics that handle the overhead lights in your car—or the chips that control your automatic windows—don’t need to be on the very latest chip tech, she adds.

Unless chip suppliers update more of their products to at least somewhat newer manufacturing technology—Dr. Gupta says that the 28 nanometer level is optimal for a number of reasons—they are left jostling for capacity at the fabs that make older-style chips, which typically have individual features that are up to 140 nanometers wide.

Even the companies that make chips are themselves affected by the chip shortage. Infineon, for example, has adequate capacity for making its own power-handling chips, but can’t get enough of the older-style microcontroller chips that its systems also require, and which it has long outsourced to third-party manufacturers like TSMC, says the spokeswoman.

The supply shocks and demand spikes of the pandemic, on top of years of growing demand for chips and the tools to make them, has represented “a complete reset of the entire semiconductor supply chain,” says Mr. Lam of CCS Insight. “Just the scale of it—I don’t think people appreciate how dramatic it has been,” he adds.

 

Nilgiri

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A great article with concise summary of the issue. I have been trying to explain this issue in various parts of the forum.

Thanks for posting this @Bogeyman I can refer others to it :p
 

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This is one area I don't think we can have much success. The moat around the companies like TMSC, Samsung, Intel is so big. I don't know what should be expected from our "ÇAKIL" program.

Is there an article or a post that shows percentage of chips used in the global market by their node sizes? Like %25 percent of the industry uses chips between 25nm and 50nm(made up numbers).
 

Zafer

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This is one area I don't think we can have much success. The moat around the companies like TMSC, Samsung, Intel is so big. I don't know what should be expected from our "ÇAKIL" program.

Is there an article or a post that shows percentage of chips used in the global market by their node sizes? Like %25 percent of the industry uses chips between 25nm and 50nm(made up numbers).
Initial iteration of Çakıl is single core 400 mhz and 65 nm. The next iteration will be quad core 800 mhz and 65 nm (?).
Aselsan is working on the design of an AI optimized chip. A current automobile chip should be 28nm as TMSC's new car chip factory in China will use this process.

I believe a 28nm chip can power both a modern car and an entry level smart phone or tablet. I would be satisfied if we could make 28nm chips in Turkey.
 

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I would be very happy if we had domestic chip and semiconductor production even small to medium scale. e.g. 1 mio. pieces a year or so. Also I believe it's necessary to have educational level cranked up to create attractive environment for investment in this sector.

China is building more and more robots every year and they're definitely going to bet on the semiconductor and chip just as much. Taiwan may have the lead, but China is hellbent on ruling Taiwain, so they'll need to take the market from Taiwan.
 

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This is from a Quora post from Bora Taş to the question "United States is pressuring the Netherlands to block the sale of EUV equipment to SMIC by Dutch company ASML is ultimately affecting China's dream in technology". How long US can resist China's development?"

I think I am the perfect person to answer this. I have been working in the semiconductor industry for years, currently living in the Netherlands, lived and worked in China for 3 years, I know a lot of engineers from ASML (expecially after they hired hundreds of Turkish engineers). Let me tell you something: High-end semiconductor manufacturing is black magic. Both the processes and tools used for it are very complex. ASML’s EUV lithography machine is probably the most complex tool humankind ever developed since it stopped jumping between trees. It took billions of Euros and decades of experience to perfect it. Other experienced lithography machine suppliers failed at it. China has no experience in high-end semiconductor manufacturing tools with the exception of one-off/few-off prototypes.

main-qimg-9f8d401e0bbd4e4a025a0c5e3301b3ad-lq

ASML’s EUV lithography machine. Needs 41 semi-trucks to get transported, costs $150 million, has 100.000 major parts, has mirrors that need months of grinding to reach needed smoothness, needs multiple people with PhD’s as machine operators. Quite high-tech. Isn’t it?

Unfortunately, ASML is a very convenient target for the USA. The company uses a lot of critical parts from the USA but those parts don’t represent anything significant in the US economy in terms of their monetary value. Chinese electronics industry still depends on foreign chips so it can not threaten fabs with banning the sale of chips in China that were manufactured using ASML tools. Also, China isn’t a big customer of ASML too. In short, China can not answer with reciprocal sanctions.

Is China hopeless? No.

1- All of those tools are engineered and made by humans, and the laws of physics are the same both in the Netherlands and China. If the Netherlands could, then there is no reason for anybody else to fail with the correct approach.

2- China is filthy rich compared to the Netherlands. Chinese economy is 17x of the Netherlands’, 9x of SK’s, 27x of Taiwan’s, 3+x of Japan’s. With state support, Chinese fabs and tool makers can hire the top people from the rest of the world with salaries ASML, LamResearch, AM, Synopsys, TSMC, Samsung, … simply can not compete with. A significant portion of these companies’ employees are expats anyway, most of them are just after money. In fact China is already doing this successfully with good results. For example, it already has a working EUV lithography machine prototype, already caught up with the rest in chip testing, packaging, wafer production, also its first immersion lithography machine (good enough for most things) is getting prepared for commercial use.

3- China is a scientific powerhouse on its own. It is the country with most patent applications, most research output, graduates more STEM students than any other country, 2nd largest R&D spender, has 11 universities in top 100. This leads us to my first point. If the Netherlands could, so can China if given enough time.

4- Catching up is much easier than innovating. Knowing something is possible and having a general knowledge of how it works make things much easier.

5- Time is on the Chinese side. Technology of semiconductors is close to maturity/stalling (choose the word depending on your view). If the development slows (which it does) it gives China the opportunity to catch-up. If a tech revolution happens, then the playing field evens out anyway.

6- You don’t need EUV for the most things. You don’t even need high-end processes for the most things. There is more to semiconductors than the latest smartphone processors, GPUs, and CPUs. Look at iPhone 12 teardown videos. You will see a lot of chips. Only one of them needs EUV. An average modern car has 250+ computers inside. That means thousands of chips. All of them are manufactured using old processes. This is even more true for military and space applications. Those use very old chips that are known to be reliable and secure.

Conclusion: Blocking ASML from selling EUV machines to China can hurt Chinese businesses for some time but in the grand scheme it is insignificant. The USA needs to run faster rather than keep trying to block China if it wants to preserve its dominance in tech.

 

Nilgiri

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This is from a Quora post from Bora Taş to the question "United States is pressuring the Netherlands to block the sale of EUV equipment to SMIC by Dutch company ASML is ultimately affecting China's dream in technology". How long US can resist China's development?"

I think I am the perfect person to answer this. I have been working in the semiconductor industry for years, currently living in the Netherlands, lived and worked in China for 3 years, I know a lot of engineers from ASML (expecially after they hired hundreds of Turkish engineers). Let me tell you something: High-end semiconductor manufacturing is black magic. Both the processes and tools used for it are very complex. ASML’s EUV lithography machine is probably the most complex tool humankind ever developed since it stopped jumping between trees. It took billions of Euros and decades of experience to perfect it. Other experienced lithography machine suppliers failed at it. China has no experience in high-end semiconductor manufacturing tools with the exception of one-off/few-off prototypes.

main-qimg-9f8d401e0bbd4e4a025a0c5e3301b3ad-lq

ASML’s EUV lithography machine. Needs 41 semi-trucks to get transported, costs $150 million, has 100.000 major parts, has mirrors that need months of grinding to reach needed smoothness, needs multiple people with PhD’s as machine operators. Quite high-tech. Isn’t it?

Unfortunately, ASML is a very convenient target for the USA. The company uses a lot of critical parts from the USA but those parts don’t represent anything significant in the US economy in terms of their monetary value. Chinese electronics industry still depends on foreign chips so it can not threaten fabs with banning the sale of chips in China that were manufactured using ASML tools. Also, China isn’t a big customer of ASML too. In short, China can not answer with reciprocal sanctions.

Is China hopeless? No.

1- All of those tools are engineered and made by humans, and the laws of physics are the same both in the Netherlands and China. If the Netherlands could, then there is no reason for anybody else to fail with the correct approach.

2- China is filthy rich compared to the Netherlands. Chinese economy is 17x of the Netherlands’, 9x of SK’s, 27x of Taiwan’s, 3+x of Japan’s. With state support, Chinese fabs and tool makers can hire the top people from the rest of the world with salaries ASML, LamResearch, AM, Synopsys, TSMC, Samsung, … simply can not compete with. A significant portion of these companies’ employees are expats anyway, most of them are just after money. In fact China is already doing this successfully with good results. For example, it already has a working EUV lithography machine prototype, already caught up with the rest in chip testing, packaging, wafer production, also its first immersion lithography machine (good enough for most things) is getting prepared for commercial use.

3- China is a scientific powerhouse on its own. It is the country with most patent applications, most research output, graduates more STEM students than any other country, 2nd largest R&D spender, has 11 universities in top 100. This leads us to my first point. If the Netherlands could, so can China if given enough time.

4- Catching up is much easier than innovating. Knowing something is possible and having a general knowledge of how it works make things much easier.

5- Time is on the Chinese side. Technology of semiconductors is close to maturity/stalling (choose the word depending on your view). If the development slows (which it does) it gives China the opportunity to catch-up. If a tech revolution happens, then the playing field evens out anyway.

6- You don’t need EUV for the most things. You don’t even need high-end processes for the most things. There is more to semiconductors than the latest smartphone processors, GPUs, and CPUs. Look at iPhone 12 teardown videos. You will see a lot of chips. Only one of them needs EUV. An average modern car has 250+ computers inside. That means thousands of chips. All of them are manufactured using old processes. This is even more true for military and space applications. Those use very old chips that are known to be reliable and secure.

Conclusion: Blocking ASML from selling EUV machines to China can hurt Chinese businesses for some time but in the grand scheme it is insignificant. The USA needs to run faster rather than keep trying to block China if it wants to preserve its dominance in tech.


It needs a deeper look into the actual scientific output (rather than nominal paper and patent proliferation).

What is the actual IP revenue China for example gets from the patents granted internationally?

How does that compare to countries like US, Germany, Japan etc?

i.e actual average ROI from patent grant.

You see one can build muscle volume by doing lot of reps with low weight.....or higher weight with low reps.

But only one actually brings core strength.

Which one has PRC done generally more than the other?

How much by circumstance, how much by decision?

How effective is one for legacy technology versus frontier stuff?

99% of the media analysis is unfortunately very surface-level stuff. It doesn't go deep enough...as the audience tends to lose interest.
 

Viva_vietnamm

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This is one area I don't think we can have much success. The moat around the companies like TMSC, Samsung, Intel is so big. I don't know what should be expected from our "ÇAKIL" program.

Is there an article or a post that shows percentage of chips used in the global market by their node sizes? Like %25 percent of the industry uses chips between 25nm and 50nm(made up numbers).
Japan may make a breakthrough in 5nm chip with her own machine .

------------------

Japanese manufacturers can produce 5nm chips without EUV lithography machine?​

2022-04-20 10:59 HKT

As we all know, in the chip production process, the lithography machine is a device that cannot be bypassed. If you look at the entire production, the cost of the lithography machine accounts for 30% of the total equipment cost.

So all the time, everyone has been looking for other ways, such as not using EUV lithography machine, can produce 7nm and below chips? In fact, some manufacturers think so and intend to do so, because multiple exposures through DUV lithography machines can theoretically reach 7nm.
However, this method is very complicated and requires very high technical requirements. At the same time, the yield rate is low, and the wafer loss is relatively large. Therefore, if EUV lithography machines can be bought, it is impossible to use this method. The chips produced by this method , There is no market competitiveness at all.

Japanese manufacturers can produce 5nm chips without EUV lithography machine?

Recently, Japanese manufacturers have come up with another method, that is, instead of using DUV multiple exposure, they have developed a new NIL process technology. This technology does not require EUV lithography machines to push the chip process to 5nm.

This manufacturer is the Japanese storage manufacturer Kioxia (Toshiba). It has cooperated with the Japanese optical/semiconductor manufacturer Canon and the mask/semiconductor manufacturer Dainippon Printing Co., Ltd. (DNP). After 4 years of research and development, finally Developed the mass production technology of Nano Imprint Lithography (NIL).
At present, Kioxia has applied it to the manufacturing of 15nm NAND flash memory, and said that it should be applied to the manufacture of 5nm chips by 2025.

Japanese manufacturers can produce 5nm chips without EUV lithography machine?

Kioxia said that compared with EUV lithography technology, NIL technology can greatly reduce energy consumption, high conversion efficiency, and power consumption can be reduced to 10% of EUV technology. At the same time, the equipment under NIL technology is also cheaper. Compared with EUV lithography machine, the investment can be reduced to only 40% of EUV equipment.
However , some professionals pointed out that NIL technology may be able to advance the chip manufacturing process to 5nm, but it may be more suitable for 3D stacked flash memory chips such as NAND, and may not be suitable for all chips.
However, Canon, one of the cooperating manufacturers, said it will work hard to widely apply NIL mass production technology to the production of logic chips such as DRAM and PC CPUs.

Japanese manufacturers can produce 5nm chips without EUV lithography machine?

I don't know what everyone thinks about this technology? If it can really advance to 5nm and be used for general-purpose chips other than NAND, then ASML will surely step down the altar.
Even to a certain extent, it is good news for domestic cores. What do you think? For this kind of corner overtaking technology, I really hope it can be a bit more, and it would be great if it was developed by a Chinese manufacturer.
https://inf.news/en/digital/0561c03b86cf15bb35522a3180534bee.html
 

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US Wants Dutch Supplier to Stop Selling Chipmaking Gear to China​


The US is pushing the Netherlands to ban ASML Holding NV from selling to China mainstream technology essential in making a large chunk of the world’s chips, expanding its campaign to curb the country’s rise, according to people familiar with the matter.

Washington’s proposed restriction would expand an existing moratorium on the sale of the most advanced systems to China, in an attempt to thwart China’s plans to become a world leader in chip production. If the Netherlands agrees, it would broaden significantly the range and class of chipmaking gear now forbidden from heading to China, potentially dealing a serious blow to Chinese chipmakers from Semiconductor Manufacturing International Corp. to Hua Hong Semiconductor Ltd.

American officials are lobbying their Dutch counterparts to bar ASML from selling some of its older deep ultraviolet lithography, or DUV, systems, the people said. These machines are a generation behind cutting-edge but still the most common method in making certain less-advanced chips required by cars, phones, computers and even robots.

ASML’s American Depositary Receipts extended losses to as much as 8.3%, the biggest intraday drop since March 2020, after Bloomberg’s initial report.

The issue arose during US Deputy Commerce Secretary Don Graves’s visit to the Netherlands and Belgium in late May and early June to discuss supply chain issues, said the people, who asked not to be identified because the discussions were private. During that trip, Graves also visited ASML’s headquarters in Veldhoven and met Chief Executive Officer Peter Wennink.


The Dutch government has yet to agree to any additional restrictions on ASML’s exports to Chinese chipmakers, which could hurt the country’s trade ties with China, the people said. ASML is already unable to ship its most advanced extreme ultraviolet, or EUV, lithography systems, which cost about 160 million euros ($164 million) per unit, to China as it cannot obtain an export license from the Dutch government.

The US push on ASML comes as President Joe Biden separately considers easing some of the Trump-era tariffs on consumer goods from China. While China may welcome such a move at a time of tense relations between the two powers, Biden’s administration has continued his predecessor’s efforts to restrict China’s access to US technology.

The US Department of Commerce and the Dutch Ministry of Foreign Affairs declined to comment.

“The discussion is not new. No decisions have been made and we do not want to speculate or comment on rumors,” an ASML spokeswoman said.

ASML is the world’s top maker of lithography systems, machines that perform a crucial step in the process of creating semiconductors. ASML’s dominance of the market for that type of equipment means that further cutting China off from access to its products would undermine the Asian country’s ambitions to make itself more self-sufficient in production of the crucial electronic components.

“China’s share of the global chip-equipment market is negligible,” said Alex Capri, a research fellow at the Asia-based Hinrich Foundation, characterizing chip production as “a choke point” in China’s plans to bulk up its semiconductor muscle.


The older generation of machinery, DUV, is less capable than more advanced EUV lithography equipment but remains indispensable in manufacturing many of the types of chips that are currently experiencing acute shortages. Washington is focused on banning sales of the most advanced type of DUV technology, immersion lithography machines, the people said.

Immersion lithography is also known as argon fluoride immersion, or simply ArFi. According to China-based Founder Securities, ASML sold 81 ArFi systems in 2021, compared with four from Japan’s Nikon Corp., giving the Dutch firm a 95% market share.

Dutch Prime Minister Mark Rutte said in June he is against reconsidering trade relations with China and called for the EU to develop its own policies toward Beijing. China is the Netherlands’ third-biggest trade partner after Germany and Belgium.

ASML opposes a ban on sales of DUV lithography equipment to Chinese customers because it is already a mature technology, Wennink said earlier this year. Chinese-based facilities, run by either domestic or foreign companies, account for 14.7% of ASML’s total revenue in 2021, according to company disclosures and data compiled by Bloomberg.

ASML is also alleging potential IP infringement by a Chinese tech firm supported by the country’s government.

US efforts to block the export of chipmaking equipment began under the Trump administration. Washington pressured the Dutch government to prevent sales of EUV lithography systems, which are required to produce the most sophisticated semiconductors and in which ASML has a monopoly.

Major US chip-equipment makers including Applied Materials Inc. and Lam Research Corp. are already banned from selling certain advanced products to SMIC due to national security concerns. The potential DUV ban could further hit SMIC and its Chinese peers.

“Lithography equipment is the most difficult equipment for China to replace when it comes to semiconductor production,” said Johnson Wang, an analyst at Taiwan Institute of Economic Research. “Without access to foreign DUV lithography equipment, the progress of China’s chip industry could come to a halt.”
 

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Biden Is Now All-In on Taking Out China​



The United States has waged low-grade economic warfare against China for at least four years now—firing volley after volley of tariffs, export controls, investment blocks, visa limits, and much more. But Washington’s endgame for this conflict has always been hazy. Does it seek to compel specific changes in Beijing’s behavior, or challenge the Chinese system itself? To protect core security interests, or retain hegemony by any means? To strengthen America, or hobble its chief rival? Donald Trump’s scattershot regulation and erratic public statements offered little clarity to allies, adversaries, and companies around the world. Joe Biden’s actions have been more systematic, but long-term U.S. goals have remained hidden beneath bureaucratic opacity and cautious platitudes.

Last Friday, however, a dense regulatory filing from a little-known federal agency gave the strongest hint yet of U.S. intentions. The Bureau of Industry and Security (BIS) announced new extraterritorial limits on the export to China of advanced semiconductors, chip-making equipment, and supercomputer components. The controls, more so than any earlier U.S. action, reveal a single-minded focus on thwarting Chinese capabilities at a broad and fundamental level. Although framed as a national security measure, the primary damage to China will be economic, on a scale well out of proportion to Washington’s cited military and intelligence concerns. The U.S. government imposed the new rules after limited consultation with partner countries and companies, proving that its quest to hobble China ranks well above concerns about the diplomatic or economic repercussions.

In short, America’s restrictionists—zero-sum thinkers who urgently want to accelerate technological decoupling—have won the strategy debate inside the Biden administration. More cautious voices—technocrats and centrists who advocate incremental curbs on select aspects of China’s tech ties—have lost. This shift portends even harsher U.S. measures to come, not only in advanced computing but also in other sectors (like biotech, manufacturing, and finance) deemed strategic. The pace and details are uncertain, but the strategic objective and political commitment are now clearer than ever. China’s technological rise will be slowed at any price.

To understand the strategy behind these new controls, it helps to look at what preceded them. A multitude of U.S. measures have limited the flow of technology to and from China in recent years. Chief among these is the Entity List, which bars designated firms from importing U.S. goods without a license. The number of unique Chinese companies on this list quadrupled, from 130 to 532, between 2018 and 2022. Leading Chinese chip companies, supercomputing organizations, and software and hardware vendors have all landed on the list. Even so, BIS exercised its discretion to license large amounts of nonsensitive exports to listed companies.

One Chinese company, Huawei, has faced a unique, supercharged version of the Entity List. BIS targeted Huawei with an expanded form of its “foreign direct product rule,” a powerful regulation that grants U.S. export controls greater extraterritorial reach. U.S. export controls primarily apply to U.S.-origin items, but the foreign direct product rule extends the scope to cover non-U.S. items that were made using U.S. technology. By leveraging America’s centrality in the global chip supply chain, BIS forced semiconductor designers and manufacturers in third countries to limit sales to Huawei. Leading-edge chips were off limits, while less advanced chips were allowed. The controls grievously wounded Huawei.


These earlier restrictions were provocative in their time, but they reflected at least some sense of proportion. The new export controls, however, are different. They effectively bring all of China under the special rule formerly reserved for Huawei. Advanced semiconductors from any country will be presumptively denied to every Chinese company, even firms lacking direct ties to Beijing’s military or intelligence services. Among other consequences, this will hamstring the development and deployment of artificial intelligence (AI) throughout the country—hindering Chinese progress in e-commerce, autonomous vehicles, cybersecurity, medical imaging, drug discovery, climate modelling, and much else. China’s own semiconductor sector is incapable of producing the leading-edge chips used in AI applications. And BIS aims to keep things that way: Its controls will block Chinese purchases of even years-old chip-making equipment and prevent American personnel from providing support or know-how.

To justify this dramatic escalation, BIS makes the same old national security arguments. Its filing takes pains to portray Chinese high-end computing as an urgent military threat. Nuclear weapons are invoked 16 times, on the grounds that top-tier processors facilitate their design and may be “inherently radiation hardened.” Artificial intelligence is cited as a surveillance tool. It’s all factually true. Yet BIS never really deals with the fundamental fact that semiconductors and AI are both dual-use, general-purpose tools. Indeed, they are the basic building blocks for an advanced, globally competitive economy. Denying them to China is effectively a form of economic containment.

Granted, the new controls fall short of a total chip embargo. Chinese firms can still import lesser semiconductors for use in cars, toasters, and much else. Moreover, BIS has not yet imposed similarly stringent controls in other technology fields, such as biotech, which may be less amenable to decoupling for technological, economic, or political reasons. But the U.S. government’s latest move reveals a strategic mindset that cannot help but influence future China tech policy. U.S. officials have focused intently on possible threats, imposed disproportionate measures, downplayed the complications, and strong-armed others into compliance. This mindset all but guarantees a continued march toward broad-based technological decoupling. Even U.S. capital flows into China, which Trump worked hard to expand as he simultaneously cracked down on tech ties, are now facing new forms of federal pressure.

Many U.S. policymakers and analysts will cheer a further decoupling. They rightly argue that Beijing’s decades-long strategy of intellectual property theft, hidden subsidies, and stealthy regulatory discrimination has played a large part in Chinese technological advancement. They correctly note that China has used its growing prowess to crush dissenters and minorities, threaten neighbors, prop up foreign autocrats, carry out espionage and influence operations, entrench market dominance, and lay the groundwork for future digital sabotage or coercion. And they can fairly claim that most previous U.S. restrictions—though hardly all—were sensible and successful.

Yet the latest U.S. move may erode some of the very conditions that have enabled earlier successes. Up until now, allies and partners were more or less willing to follow America’s lead, China proved unable to respond forcefully, the private sector adapted well enough, and U.S. technocrats had room to shape key policy details. The next phase of decoupling, however, could be more unpredictable and riskier. The increasing boldness of U.S. unilateral actions, and Washington’s open embrace of a quasi-containment strategy, will draw reactions from many actors. This may finally set in motion forces beyond the control of U.S. national security leaders. Four different groups will define what happens next.

The most important set of players is U.S. allies and partners. They will of course comply with the new export controls, due to the long arm of U.S. law. But Washington can’t afford to settle for begrudging obedience, because export controls are just one part of America’s international technology agenda. The United States sorely needs other nations to coordinate industrial policy, share economic intelligence, harmonize digital regulations, press Beijing on joint concerns, and collectively envision a future economic order. This requires difficult negotiations.

The United States has labored, for example, to launch a “Chip 4” alliance with South Korea, Taiwan and Japan. which together dominate much of the semiconductor industry. But the project has been plagued by internal conflict, and it must now overcome Seoul’s outrage at its companies’ exclusion from a new U.S. electric vehicle tax credit. Washington has also tried to write a human rights code of conduct for export controls alongside Canada, France, the Netherlands, and the United Kingdom, though 10 months have passed with no public results. The U.S.-European Union Trade and Technology Council has been more productive. The Indo-Pacific Economic Framework, less so. Ambitious multilateral efforts, like the U.S. hope of reforming the World Trade Organization, have yet to pick up steam.

America’s latest export controls undermine these dialogues in two ways. By revealing the maximalism of Washington’s campaign against Chinese technology, the move will sharpen debates in allied capitals about whether U.S. aims align with their own political and economic interests. And by flexing unilateral muscles so forcefully, the controls will cast doubt on U.S. willingness to accommodate differing interests. (U.S. officials imposed the new controls while international consultations were still underway, without securing any specific agreements.)


China, of course, will also react. Symmetrical retaliation—for example, blocking U.S. imports of critical minerals or punishing key companies such as Microsoft, Apple, or Tesla—is unlikely. China has much to lose from such actions, and its economy already faces major headwinds. Beijing may instead push back in subtler ways, perhaps slow-rolling regulatory approvals or undermining the recent U.S.-China deal on public company accounting standards. The bigger threat would be Chinese reprisals against U.S. allies and partners—like South Korea, Japan, or Taiwan—that must implement Washington’s controls. China has more leverage against these countries and will want to insert a wedge in America’s economic coalition.

China may also file a WTO complaint. Many U.S. national security officials will roll their eyes at this ponderous and partly broken process, but its long-term consequences should not be dismissed. Much of the edifice of U.S. techno-nationalist policy—from export controls to tariffs to blacklists—runs more or less counter to the WTO’s general bar against country-based discrimination. The United States justifies its actions by expansively interpreting the “national security exception,” but it has wisely avoided testing this argument in formal dispute resolution. A 2019 WTO decision concerning Russia and Ukraine cast real doubt on the U.S. interpretation, both as a general matter and as applied to these new export controls. An adverse ruling would raise concerns among WTO-minded actors such as the European Union and much of the Global South. Moreover, a big U.S. loss could further erode American commitment to the open trading system, ultimately imperiling its viability even as no plan yet exists for what might replace it.

America’s embrace of quasi-containment will come as no surprise to Xi Jinping. But it will certainly help him promote Beijing’s longstanding narrative that a hegemonic United States seeks to stifle China’s normal development. Many countries may be receptive to this argument, judging from the Global South’s lukewarm response to U.S.-led sanctions and trade restrictions against Russia. China can also portray U.S. export controls as stymying progress on shared global challenges. It may cite, for example, the need of Chinese researchers to use supercomputers for vaccine development and climate science. (A recent Biden order defined “advanced clean energy” and “climate adaptation technologies” as “areas affecting U.S. national security” that may warrant restrictive measures.)

The global private sector represents another important set of players. It is well-known that U.S. export controls incentivize firms to escape American jurisdiction by offshoring their operations. Likewise, the foreign direct product rule encourages fuller purging of U.S. technology throughout a global supply chain. This is admittedly hard to pull off. Regardless, private actors will respond to the new export controls’ signal of heightened geopolitical risks. Washington has revealed a clear intent to suppress Chinese technological advances and a willingness to bear growing economic costs to do so. Businesses and investors will realize that decoupling is nowhere near its stopping point. Firms will expect a wide range of follow-on restrictions, not only tougher outbound investment screening and cross-border data rules, but other undefined measures still over the horizon. This will exert a chilling effect on U.S.-China commerce, and perhaps even financial ties, across many sectors.

Some U.S. policymakers may welcome such developments. Figures from Mike Pompeo to Christopher Wray to Mark Warner have exhorted U.S. companies to rethink their China ties in light of intellectual property theft, a possible Taiwan crisis, and other business risks. But Washington could wind up getting more than it bargained for. Many private actors have grown weary of a U.S. policy process that is sometimes opaque, unpredictable, irregular, and even uninformed. In the face of this uncertainty, firms (and academic institutions) may pull back from benign and beneficial areas of U.S.-China engagement. The private sector could ultimately choose to accelerate its own decoupling, which may be broader, faster, and more chaotic than U.S. policymakers have planned for.

U.S. businesses and universities may spurn high-skilled Chinese applicants who pose no real national security risk but would nonetheless face vague and onerous visa screening, “deemed export” controls, or research security requirements. U.S. organizations may slow their adoption of innovative technology (drones, for example) due to the growing risk of bans on Chinese equipment and the dearth of competitive alternatives. U.S. companies may fail to bring new goods to market if China offers the most viable manufacturing site yet there is too much regulatory risk (from possible outbound investment screening, data protection rules, tariffs, and more) to justify long-term investments there. In these and other scenarios, a volatile U.S. policy environment forces private actors to go beyond or move ahead of what policymakers may actually want, harming U.S. interests in the process.

Finally, the new export controls will reverberate within the U.S. political system. Biden probably hopes to fend off Republican attacks that he is weak on China. This may help in the November midterm elections, but in the long run it’s a mug’s game. Anti-China measures have been a one-way ratchet: Each new restriction or sanction simply ups the ante for the next one, empowering hardline voices in the process. There will soon be calls to broaden these export controls and use even more powerful weapons, like the Specially Designated Nationals List, against major Chinese companies.

If Biden is not yet prepared to take these steps, he will find it increasingly hard to explain why. Neither he nor any other U.S. leader has made a serious effort to educate the American people about the costs and risks of decoupling. Rather, popular discourse and political energy overwhelmingly favor the restrictionists. Republicans have made China-bashing central to their brand, and few Democrats are interested in challenging their premises or pointing to possible trade-offs. Many business leaders think differently, but they have lost political sway and they know it. Most choose to keep their head down, offering quiet pleas and technical comments to rulemakings. (The Semiconductor Industry Association said only that it was “assessing the impact of the new export controls,” which were imposed prior to the formal comment period.) In short, not a single prominent political figure has emerged as a major voice of caution on decoupling. So long as that remains true, harsh new controls will only further consolidate the restrictionists’ dominance of mainstream discourse and build momentum for more of the same.


U.S.-led technological decoupling from China has had enormous consequences in just a few short years. It has rewired international relationships, unsettled the global economic order, and transformed technology policymaking and politics in many countries. In this high-stakes game, Washington has been both card player and card dealer, making its own moves while constraining the choices of others. Now the United States has gone all-in—wagering like never before and placing its cards on the table for all to see. The decisive American gamble: to openly block China’s path to become an advanced economic peer, even at significant risk to U.S. and allied interests. Bigger U.S. moves are probably coming in the future. But for now, Washington must wait to see how others play their hands.

 

TR_123456

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This is from a Quora post from Bora Taş to the question "United States is pressuring the Netherlands to block the sale of EUV equipment to SMIC by Dutch company ASML is ultimately affecting China's dream in technology". How long US can resist China's development?"

I think I am the perfect person to answer this. I have been working in the semiconductor industry for years, currently living in the Netherlands, lived and worked in China for 3 years, I know a lot of engineers from ASML (expecially after they hired hundreds of Turkish engineers). Let me tell you something: High-end semiconductor manufacturing is black magic. Both the processes and tools used for it are very complex. ASML’s EUV lithography machine is probably the most complex tool humankind ever developed since it stopped jumping between trees. It took billions of Euros and decades of experience to perfect it. Other experienced lithography machine suppliers failed at it. China has no experience in high-end semiconductor manufacturing tools with the exception of one-off/few-off prototypes.

main-qimg-9f8d401e0bbd4e4a025a0c5e3301b3ad-lq

ASML’s EUV lithography machine. Needs 41 semi-trucks to get transported, costs $150 million, has 100.000 major parts, has mirrors that need months of grinding to reach needed smoothness, needs multiple people with PhD’s as machine operators. Quite high-tech. Isn’t it?

Unfortunately, ASML is a very convenient target for the USA. The company uses a lot of critical parts from the USA but those parts don’t represent anything significant in the US economy in terms of their monetary value. Chinese electronics industry still depends on foreign chips so it can not threaten fabs with banning the sale of chips in China that were manufactured using ASML tools. Also, China isn’t a big customer of ASML too. In short, China can not answer with reciprocal sanctions.

Is China hopeless? No.

1- All of those tools are engineered and made by humans, and the laws of physics are the same both in the Netherlands and China. If the Netherlands could, then there is no reason for anybody else to fail with the correct approach.

2- China is filthy rich compared to the Netherlands. Chinese economy is 17x of the Netherlands’, 9x of SK’s, 27x of Taiwan’s, 3+x of Japan’s. With state support, Chinese fabs and tool makers can hire the top people from the rest of the world with salaries ASML, LamResearch, AM, Synopsys, TSMC, Samsung, … simply can not compete with. A significant portion of these companies’ employees are expats anyway, most of them are just after money. In fact China is already doing this successfully with good results. For example, it already has a working EUV lithography machine prototype, already caught up with the rest in chip testing, packaging, wafer production, also its first immersion lithography machine (good enough for most things) is getting prepared for commercial use.

3- China is a scientific powerhouse on its own. It is the country with most patent applications, most research output, graduates more STEM students than any other country, 2nd largest R&D spender, has 11 universities in top 100. This leads us to my first point. If the Netherlands could, so can China if given enough time.

4- Catching up is much easier than innovating. Knowing something is possible and having a general knowledge of how it works make things much easier.

5- Time is on the Chinese side. Technology of semiconductors is close to maturity/stalling (choose the word depending on your view). If the development slows (which it does) it gives China the opportunity to catch-up. If a tech revolution happens, then the playing field evens out anyway.

6- You don’t need EUV for the most things. You don’t even need high-end processes for the most things. There is more to semiconductors than the latest smartphone processors, GPUs, and CPUs. Look at iPhone 12 teardown videos. You will see a lot of chips. Only one of them needs EUV. An average modern car has 250+ computers inside. That means thousands of chips. All of them are manufactured using old processes. This is even more true for military and space applications. Those use very old chips that are known to be reliable and secure.

Conclusion: Blocking ASML from selling EUV machines to China can hurt Chinese businesses for some time but in the grand scheme it is insignificant. The USA needs to run faster rather than keep trying to block China if it wants to preserve its dominance in tech.

Your take on post 11 of this thread?
I heard about it before somewhere,i guess this is an alternative method?
 

Bogeyman 

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Your take on post 11 of this thread?
I heard about it before somewhere,i guess this is an alternative method?
This post is no longer valid. Because the USA started to target China's economy with the microchip embargo. Moreover, it looks like he will soon force his allies to do so. It had previously targeted only the defense industry.
 

Zafer

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Global recession is a thing now.
However like alongside every change there will be opportunities for others to take.
 

Rodeo

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Your take on post 11 of this thread?
I heard about it before somewhere,i guess this is an alternative method?
I'm not really well-versed in the topic. I'm trying to learn more about the manufacturing methods but I cannot comment on them, just yet.
 

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