Microelectronics and Rare Earth Elements Sectors

Bogeyman 

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China Restricts Exports of Two Minerals Used in High-Performance Chips​


China set export restrictions on two minerals the U.S. says are critical to the production of semiconductors, missile systems and solar cells, a show of force ahead of economic talks between two rivals that increasingly set trade rules to achieve technological dominance.

The minerals—gallium and germanium—and more than three dozen related metals and other materials will be subject to unspecified export controls starting Aug. 1, Beijing’s Ministry of Commerce said Monday. Its statement referred to safeguarding national security and interests and said some future export applications would require review by the government’s top body, the State Council.

The China-U.S. rivalry increasingly features export restrictions tailored to slow the high-technology industries of the other nation. Trading complaints about such controls, which both sides say are designed to protect national security, have featured in a return to high-level talks between the two governments. More focus on the issue is likely when Treasury Secretary Janet Yellen visits Beijing later this week and if Commerce Secretary Gina Raimondo makes an expected trip in the coming months.

The U.S. Commerce Department had no immediate comment.

The U.S. in October halted exports to China of equipment used to produce more technically advanced semiconductors and has leaned on allies like South Korea and the Netherlands to do the same. Beijing warned its companies to consider the national-security implications of exports to the U.S. It banned the use of products made by Micron, the U.S.’s biggest memory-chip maker, in its critical information-infrastructure firms, while warning American allies to reject what it terms Cold War-type protectionism peddled by Washington.

Complexities bind the U.S. and China in production of wares such as semiconductors in ways that make it difficult for either side to act too rashly, a kind of technology-sector equivalent of mutually assured destruction. The Biden administration is trying to entice producers such as Samsung and Taiwan Semiconductor Manufacturing Co. to expand in the U.S. but getting them to turn their back on China appears unlikely.

The new restrictions on gallium and germanium affect specialty metals produced and refined primarily in China, giving it leverage in some cutting-edge sectors. Neither gallium or germanium is traded in large quantities. Both nevertheless have uses important to particular industries, especially production of semiconductors that are often designed in and for use in the U.S. even if made in Taiwan and South Korea.

“This measure will have an immediate ripple effect on the semiconductor industry, especially with regards to high-performance chips,” said Alastair Neill, board member of the Critical Mineral Institute who has nearly 30 years of experience with China’s metals industry.

China has smarted at U.S. efforts to slow the advance of its semiconductor manufacturing, which Washington warns is ultimately aimed at strengthening Beijing’s military. The Biden administration has made it difficult for China to buy lithography machines needed to produce high-performance chips, and last week scored a win when the Dutch government said its equipment makers like ASML would need government permission to ship some products abroad.

Chinese chip makers and suppliers who gathered in Shanghai for a recent industry event were in a grim but defiant mood following a Wall Street Journal report that the Biden administration is considering new restrictions on exports of artificial-intelligence chips to China.

Industry analysts see a pattern of tit-for-tat. “If you don’t send high-end chips to China, China will respond by not sending you the high-performance elements you need for those chips,” said Neill, who added that Beijing usually tries to match U.S. trade measures with a countermeasure of equal proportion.

Both gallium and germanium appear among 50 minerals that the U.S. Geological Survey deems “critical,” meaning they are essential to the economic or national security of the U.S. and have a supply chain vulnerable to disruption.

Gallium, a soft, silvery metal at room temperature, is a key ingredient in a fast-growing class of semiconductors used in phone chargers and electric vehicles, among a growing range of commercial and military applications. About 53% of the U.S.’s gallium was imported from China between 2018 and 2021, according to the U.S. Geological Survey, with imports decreasing substantially in 2019 after the U.S. imposed higher tariffs on Chinese gallium. There is no U.S. production of unrefined gallium.

Gallium arsenide—a compound with arsenic—is widely used for high-performance chips because it is more resistant to heat and moisture as well as more conductive than silicon. At the moment, “no effective substitutes exist for GaAs in these applications,” noted the 2023 U.S. Geological Survey on gallium.

The U.S. military relies on gallium nitride, a related product, for its properties for efficiently transmitting power deployed in the most advanced radars under development. It is also being used in the replacement for the Patriot missile-defense system being made by RTX, formerly known as Raytheon Technologies. Beijing previously had said it would seek to prevent a unit of RTX, which didn’t respond to a question about gallium, from using Chinese products in its military technology.



In 2016, the U.S. blocked the proposed purchase by Chinese investors of a controlling stake in an auto and light-emitting diode components business unit of the Dutch electronics company Philips valued at $2.8 billion over concerns of the dual-use potential for gallium nitride.

Sales of chips using gallium nitride were $2.47 billion last year, according to Precedence Research, but are expected to climb to $19.3 billion by 2030. Chips produced with gallium-arsenide are expected to grow from $1.4 billion last year to $3.4 billion in 2030, according to Research and Markets.

Germanium, a lustrous, grayish-white metal, can make silicon a faster conductor and is often used in making fiber-optic systems and solar cells, including those used in space applications.

To trade experts, China’s new export restrictions on the commodities is a reminder of an earlier export-quota system Beijing imposed for rare earths, another group of metals produced mostly in China that have prized qualities for high-technology manufacturers. The U.S. in 2014 won a case at the World Trade Organization that argued China’s export limits on rare earths, as well as tungsten and molybdenum, were inconsistent with international trade rules.

Later, in 2019, Chinese leader Xi Jinping made a visit to one of the country’s key rare-earth production zones. To analysts, the visit appeared to be a warning Beijing could disrupt trade in the minerals, days after the Trump administration made it illegal to supply some U.S. technology to Chinese telecommunications equipment maker Huawei Technologies.

Export controls allow Beijing to target individual companies as well as broader sectors of particular industries and make decisions based on geopolitical considerations, said Paul Triolo, senior vice president for China and technology-policy lead at the Washington-based advisory firm Albright Stonebridge Group.

China has signaled to the U.S. that it is interested in establishing a new bilateral dialogue on export controls, and the latest move could provide Beijing with more leverage in coming discussions with Washington, he said.

The controls announced Monday follow a pattern of quieter restrictions on American access to other commodities produced in China, such as materials known as super-abrasives that also are used in high-technology industries, according to Nazak Nikakhtar, a trade lawyer who formerly held roles related to national security and commodity supply chains at the Commerce Department and is now a partner at Washington law firm Wiley Rein LLP. “It’s really arm-flexing, to remind the U.S. how strong they are and to remind us how much control they have over our supply chains,” she said.

While Nikakhtar said she doesn’t think the gallium and germanium restrictions are designed to be a bargaining chip for the coming talks with American officials, she said they should seize the opportunity to remind their Chinese counterparts that Washington can close loopholes on its current export restrictions and that it has the power to apply economic sanctions.

 

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U.S. Looks to Restrict China’s Access to Cloud Computing to Protect Advanced Technology​

The Biden administration is preparing to restrict Chinese companies’ access to U.S. cloud-computing services, according to people familiar with the situation, in a move that could further strain relations between the world’s economic superpowers.

The new rule, if adopted, would likely require U.S. cloud-service providers such as Amazon.com AMZN -0.11%decrease; red down pointing triangle and Microsoft MSFT -0.75%decrease; red down pointing triangle to seek U.S. government permission before they provide cloud-computing services that use advanced artificial-intelligence chips to Chinese customers, the people said.

The Biden administration’s move would follow other recent measures as Washington and Beijing wage a high-stakes conflict over access to the supply chain for the world’s most advanced technology.
Beijing Monday announced export restrictions on metals used in advanced chip manufacturing, days ahead of a visit to China by Treasury Secretary Janet Yellen.


The proposed restriction is seen as a means to close a significant loophole. National-security analysts have warned that Chinese AI companies might have bypassed the current export controls rules by using cloud services.

These services allow customers to gain powerful computing capabilities without purchasing advanced equipment—including chips—on the control list, such as the A100 chips by American technology company Nvidia NVDA 0.26%increase; green up pointing triangle.

“If any Chinese company wanted access to Nvidia A100, they could do that from any cloud service provider. That’s totally legal,” said Emily Weinstein, a research fellow at Georgetown Center for Security and Emerging Technology.

The Commerce Department is expected to unveil the action within the coming weeks as part of an expansion of its semiconductor export control policy implemented in October, the people said.


The Commerce Department declined to comment.

The ban on cloud services would be the latest in a series of tit-for-tat actions between Washington and Beijing over semiconductors and other advanced technologies.

Concerned about China’s advancement in artificial-intelligence technologies and their military applications, the Biden administration is stepping up efforts to limit transfers of chips and other products and services to Chinese companies.

China has struck back, including banning some firms from buying products from Micron Technology, the largest memory-chip maker in the U.S.

Yellen has said she is hoping to arrest a downward spiral in relations, as U.S. officials worry that China could cut off access to key goods such as components to electric-vehicle batteries. In China, meanwhile, officials contend the U.S. is seeking to hobble China’s economic development.

Weinstein said that as an alternative to blacklisting certain types of chips in cloud service, the administration could also restrict U.S. cloud companies from offering services to users linked to military, security or intelligence services in China and other countries of concern.

The new policy would expand the reach of the export control policy to a new set of companies beyond the semiconductor and equipment makers. Among U.S. cloud-service providers, Amazon Web Services and Microsoft’s Azure are expected to be the most affected because of their existing presence in the Chinese market.

Neither Microsoft nor Amazon had any immediate comment on the potential action.

In October, the Biden administration unveiled restrictions to curb exports of advanced chips and equipment, but hasn’t codified them in final rules. In the coming weeks, the final and upgraded regulations are expected to be issued, including expanding the scope of restrictions on artificial-intelligence chips made by Nvidia and other chip makers. The new cloud-computing rule will be part of that effort.

As part of the update, the U.S. is also expected to unify the list of controlled chip-making equipment with the Netherlands and Japan. On Friday, the Dutch government published formal rules requiring its companies to seek government permission before they can sell some types of chip-making equipment abroad.

Under the rule announced by the U.S. last year, U.S. chip makers are required to obtain a license from the Commerce Department to export certain chips used in advanced artificial-intelligence calculations and supercomputing that are used in modern weapons systems.

Outside of the export control regime, U.S. officials and lawmakers have also been considering implementing steps to curb U.S. operations of Chinese cloud-service providers such as Alibaba and Tencent.
 

Zafer

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I hear that Japan emposes 45 nm and down sanction to China now. China can only make 90 nm with domestic means alone.
 

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It seems their 28nm lithography machine has gone through extensive testing and finally has been certified.

Let's see how this one works out.
 

Zafer

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There was talk about them having a 7 nm process but than silence prevails.
 

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Afaik, the Official statement only includes 28 nm machine from the beginning.
 

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F0MWOzJWAAADwjE
 

Chocopie

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There was talk about them having a 7 nm process but than silence prevails.
Yes, SMIC tweaked existing DUV litho machinery (ASML, Nikon or Canon) and tools for a 7nm process in low volume production and with high yield loss on the wafers. Practically copying older TSMC 7nm node process for simpler designed Bitcoin Miner SoC. Just highly unprofitable but a way to further climb up in technology level and somehow someday circumvent chip sanctions. Financial losses doesn’t concern a cash-rich China.

But without EUV litho machinery from monopolist ASML they won‘t be able to master <5nm process.
 

Bogeyman 

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Yes, SMIC tweaked existing DUV litho machinery (ASML, Nikon or Canon) and tools for a 7nm process in low volume production and with high yield loss on the wafers. Practically copying older TSMC 7nm node process for simpler designed Bitcoin Miner SoC. Just highly unprofitable but a way to further climb up in technology level and somehow someday circumvent chip sanctions. Financial losses doesn’t concern a cash-rich China.

But without EUV litho machinery from monopolist ASML they won‘t be able to master <5nm process.
I don't think there is any obstacle for them to steal this technology from ASML.
 

Chocopie

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I don't think there is any obstacle for them to steal this technology from ASML.
There‘re many obstacles IMO to steal this kind of tech. It‘s not a technology that anyone can simply reverse engineer with stolen blueprints. Guestimates are that in a decade or so, the Chinese will master EUV lithography finally. Would like to recommend this very insighful Bloomberg piece about ASML and US chip sanctions:

 
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Full Bloomberg article:

ASML, Europe’s Most Valuable Tech Firm, Is at the Heart of the US-China Chip War​

The low-profile firm has become crucial to a half-trillion-dollar global industry.

US President Joe Biden holds a semiconductor before signing an executive order at the White House in Washington, on Feb. 24, 2021.

US President Joe Biden holds a semiconductor before signing an executive order at the White House in Washington, on Feb. 24, 2021.

By Cagan Koc, Ian King and Jillian Deutsch
27. April 2023

In 1984, Martin van den Brink, a young Dutch engineer, joined a newly created venture in a quiet corner of the Netherlands. Little did he know then that about 40 years on the company would be so crucial to the $580 billion semiconductor industry that it would be the epicenter of a US-China chip war.

ASML Holding NV, where Van den Brink is now the chief technology officer, practically owns the market for a critical piece of equipment needed to produce the brains of everything that makes modern life possible — from cars and smartphones to computers, microwaves and airplanes. With the company’s high-end machines churning out chips that can also go into state-of-the-art weapons and artificial intelligence devices, ASML is effectively being treated as critical infrastructure for US national security and has become a target of industrial espionage for China.

“I never expected to be where we are today,” said Van den Brink.

ASML Holding NV

Martin van den Brink. Source: ASML

Over his nearly four decades at the company, ASML has gone from a bit player competing with the likes of Nikon, Canon and Ultratech to the world’s only maker of very high-end semiconductor lithography equipment. Its ascent has made it Europe’s most valuable technology company, with a market capitalization of over $247 billion — more than twice that of its customer Intel Corp. In an industry where devices typically cost $10 million, ASML commands about $180 million for its current top-end machine. And although the chip market has softened recently, ASML is still growing and its long-term outlook seems intact, thanks to the insatiable demand for computing power.

“This is a company that the world can’t exist without,” said Jon Bathgate, a fund manager at NZS Capital LLC in Denver, which has about $2 billion under management, with ASML as one of its biggest holdings. “They’ve got a 20-year head start… Investors have clearly realized how important ASML is as a company and how difficult it would be to replicate. It’s a natural monopoly with secular growth winds. That’s unique.”

As chips become for geopolitics in the 21st century what oil was in the last one, ASML’s singular success has thrust it squarely in the crosshairs of the intensifying tensions between the US and China. With the US focused on the strategic importance of semiconductors, Presidents Donald Trump and Joe Biden have done everything to ensure that China is a couple of generations behind in chips. No company is more critical to that effort than ASML.

President Biden Signs Chips And Science Act Of 2022

US President Joe Biden signs the Chips and Science Act of 2022, during a ceremony at the White House in Washington, on Aug. 9.

“Most people in industry and government believe that lithography tools are the strongest of the choke points that Western governments have put in place,” said Chris Miller, an associate professor of international history at Tufts University and the author of Chip War. “Because of that, there’s been intense focus” on ASML.

Barred from selling many of its top-end machines in China, and a victim of data thefts, ASML is doing the only thing it can to preserve its almost insurmountable lead: building evermore sophisticated machines. Its next contraption, about the size of an Amsterdam studio apartment, is set to hit markets in 2025. With a price tag of more than $380 million — costlier than a Boeing 787 Dreamliner — it will be capable of etching delicate patterns on silicon wafers smaller than a virus. Already way ahead of rivals, ASML is making sure no one can do what it does for the foreseeable future. Its only real hurdle will be technological limits — building machines that are viable and economical for mass production.

“Even if someone is able to catch up with where we are today, we will make sure that in 10 years we are operating in a completely different paradigm,” Roger Dassen, the company’s chief financial officer, said in an interview. “That’s the best way we can protect our position... So you can catch up with where we are today, but we will be at a different place by then.”

ASML's Growth Takes Off​

Source: Company reports, Bloomberg estimates

In 2019, under pressure from the Trump administration, the Dutch government withheld an export license enabling ASML to sell its top-of-the-line extreme ultraviolet, or EUV, lithography machines to SMIC, China’s main semiconductor foundry. Then, pushed by the Biden administration, the Netherlands tightened the screws further. Its March plan for additional restrictions would rein in exports of more advanced versions of ASML’s older immersion deep ultraviolet, or DUV, lithography machines that can be used with other technologies to make powerful chips for dual civil and military use.

“The business risk for ASML strongly depends on two things: First, whether there will be a ban on a certain DUV equipment type, for example, the most advanced one, or if in the future, there will be a full DUV ban, which would have a much more severe impact,” said Julia Hess, project manager at Stiftung Neue Verantwortung, a German think tank. “Second, how the controls will be aligned with countries that have competing companies, such as Japan.”

China is working on building its own semiconductor industry, pouring billions into a chip-building initiative to catch up to the US. Its purchase of older technology has boosted earnings for much of the semiconductor equipment sector. The Asian giant, which a decade ago was a rounding error for ASML, was its third-biggest market behind Taiwan and South Korea in 2022, accounting for about 15% of revenue.

relates to ASML, Europe’s Most Valuable Tech Firm, Is at the Heart of the US-China Chip War

The Semiconductor Manufacturing International Corp. (SMIC) headquarters in Shanghai.

Not being able to sell more powerful equipment in China may become a drag on growth in the future, but for now ASML can barely keep up with its non-China demand, and says the bans have “no material effect.” Its backlog is almost twice its annual revenue, and its biggest customer Taiwan Semiconductor Manufacturing Corp. isn’t cutting capital expenditure. Also, the US and Europe have unveiled plans to invest about $100 billion in the chip industry.

But ASML Chief Executive Officer Peter Wennink still believes the China blockade is a mistake, saying it will hasten that country’s efforts to develop its own chip equipment.

“If they cannot get those machines, they will develop them themselves,” he said in an interview. “That will take time, but ultimately they will get there… The more you put them under pressure, the more likely it is that they will double up their efforts.”

relates to ASML, Europe’s Most Valuable Tech Firm, Is at the Heart of the US-China Chip War

Peter Wennink during a news conference in Seoul, on Nov. 15.

Some Chinese individuals and entities have resorted to stealing ASML technology. The company, with about 1,500 people in China, disclosed in February that a former employee had taken some technical information. Last year, it accused a Beijing-based firm, regarded by Chinese officials as one of the country’s most promising tech ventures, of potentially stealing its trade secrets.

ASML argued in a 2018 trial in California that Dongfang Jingyuan Electron Ltd. and defunct Silicon Valley firm Xtal were created a month apart in 2014 by a former employee named Zongchang Yu with the express purpose of stealing and transferring its technology to China. Yu now runs Dongfang in Beijing with ample support from the Chinese government, according to company statements and other Chinese documents.

China Rising​

From next to nothing in 2015, ASML's China revenue has surged

Source: Company data compiled by Bloomberg

The case prompted ASML to protect its intellectual property more fiercely than even before. Its information security staff rose 20% from 2021 to 300. It created a “circle of trust” to train suppliers on cybersecurity risks and keeps tabs on any potential reverse engineering of its machines.

CFO Dassen also points to the futility of attempts to steal the company’s technology. With 5,000 suppliers of everything from software to tin and tungsten and strategic partnerships with companies like Carl Zeiss AG, which makes its critical multilayer mirrors, ASML runs a global ecosystem that would be difficult to match, he notes.

“A lot of ASML’s technology is not on blueprints,” he said. “It’s in the heads of people. And you don’t need just the blueprints; you need everything surrounding it and the entire supply chain. You have to build an alternative Zeiss etc. That is a colossal task. You’re not talking about months or years. You’re talking about a decade or more before you could replicate something like this.”

ASML Holding NV

Assembly of an EUV system in a cleanroom at the ASML headquarters in Veldhoven, Netherlands.

A peek at how the company — based in a country better known for its canals, bicycles and cannabis-selling coffee shops — has cobbled together a vast, global ecosystem shows why there are no easy workarounds to ASML for China.

“You cannot do it all,” said Van den Brink in a written response to questions, alluding to the company’s targeted acquisitions and partnerships. “You have to do the things that you’re good at. And work with other parties that are better in something than you could ever be. And then you can bring the best from yourself and the best from those around you together.”

Headquartered in the tidy small town of Veldhoven in the Netherlands’s industrial heartland, ASML was all but written off a few decades ago as a bottomless pit for Philips, the Dutch conglomerate from which it was spun off. It struggled in the 1980s to find buyers for its equipment. Its 1995 initial public offering gave it the funds it needed for research, and a breakthrough in DUV lithography machines boosted its market share to nearly 50% in the early 2000s. Then, a moonshot development took it to a whole new level: EUV lithography.

ASML Holding NV

An illustration of the full optical light path of an EUV system.

A US government-led EUV consortium had roped in ASML to see how marketable the technology was. Making a huge bet on EUV, something its rivals balked at, the company focused efforts over the next two decades on bringing it out of the lab and into salable machines. It worked with scientists from three US labs, got equity investments from Intel, TSMC and Samsung Electronics Co. in an unprecedented market collaboration, acquired some key US companies like Cymer and HMI, and signed up hundreds of suppliers across the globe. By 2018, it was ready to mass-produce EUV machines, and by 2021, it owned more than 90% of the $17.1 billion global market for lithography equipment.

EUV lithography uses light of a shorter wavelength to allow chipmakers to cram exponentially higher numbers of transistors into integrated circuits to make powerful chips. The gigantic EUV machine, about the size of a school bus when fully assembled at a customer’s site, takes three to four Boeing 747s to deliver. Weighing 180 metric tons, it consists of more than 100,000 parts, 3,000 cables and 40,000 screws, and requires more than 2 kilometers of hoses.

Big Three Account for More Than Half of ASML's Sales​

Intel's new enthusiasm for EUV should send that even higher

Source: Bloomberg supply chain analysis

As the world’s only maker of such machines, ASML has left its rivals in the dust and shown how difficult it would be for a potential Chinese competitor to emerge.

“It’s not even remotely possible” for anyone to catch up with ASML anytime soon, said Douglas O’Laughlin, an analyst at Fabricated Knowledge, an industry newsletter. “There is the potential for some kind of inflection that we’re not privy to right now. But all the people who would know how to do it probably work for ASML.”

Access to ASML’s most advanced machines has dictated which companies succeed in the industry. Intel, which was slow to adopt EUV machines, fell off its perch as the world’s largest chipmaker last year after holding that spot for close to 30 years. TSMC, which took advantage of the new technology more quickly and is ASML’s biggest customer, is on course for that title this year, according to analysts’ projections, overtaking Samsung and relegating the US company to the third spot.

TSMC Arizona Hosts "First Tool-In" Ceremony

Apple CEO Tim Cook and TSMC Founder Morris Chang during a "First Tool-In" ceremony at the under construction TSMC facility in Phoenix in December.

As of the end of 2022, ASML had delivered 180 EUV systems. It plans to ship 60 EUVs this year, and wants to boost manufacturing capacity so it can almost double the number of the older DUV systems it produces to 600 by 2026. It also wants to build by 2030 as many as 30 of its next machine, dubbed high-NA EUV, which is slated for high-volume chip manufacturing in about two years.
Semiconductor makers are keen to buy this newest machine because many emerging technologies require chips that are more powerful than the ones currently available, said Dylan Patel, chief analyst and founder of SemiAnalysis, an industry research and consulting firm. Features like Apple Inc.’s augmented reality headsets with high-density and long-lasting batteries or servers that could someday run the AI tool ChatGPT-7 are “just not possible with current technology,” he said. “High-NA EUV very well could be the thing that unlocks that.”

That said, not everyone is convinced the transition to these increasingly complex machines will be smooth. For all the “respect and admiration” he has for ASML, the difficulties chipmakers are likely to encounter are not evident in the company’s stellar share price increase, says Timm Schulze-Melander at Redburn in London, who is the only analyst tracked by Bloomberg with a “sell” rating on ASML shares.

European Tech Giant ASML Holding NV’s Expansion Stirs Opposition in Its Dutch Hometown

The ASML campus in Veldhoven, Netherlands.

“High-NA EUV has big technical as well as economic challenges that the consensus is not reflecting,” he said. “Even for existing EUV lithography, it’s worth remembering that the technology is difficult to run in high-volume manufacturing. Despite the hype, today only three chipmakers — TSMC, Samsung and SK Hynix — currently deliver chips made with EUV lithography. ”
So how far can ASML economically take its miniaturizing technology? That’s the big question — more than the fear of a Chinese entity catching up with ASML. Even within the company, some worry that it is technology that will eventually limit the company.

“The big long-term risk is that new lithography systems are too costly and unwieldy to produce,” said Chip War author Miller. “ASML will bring its high-NA systems online, but the generation after that, hyper-NA, is still in development. Some ASML staff have speculated it may be too difficult to mass-produce.”
 
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what

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Copying ASML, means copying decades of research and operational excellence not only at ASML, but the optics from Carl Zeiss or Lasers from Trumpf. In the past China (and Taiwan, Japan, S. Korea) bought foreign technology in the west and went from there, building their own industries and universities. I doubt China will get their hands on anything good in the west for the next decades.

But we're talking about China, unlimited human capital and money is not an issue either. So they might eventually get there, but it wont be taking the easy way this time.
 

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I watched the Dune remake movie recently. Microchips are the „spice“ of our world. An arduous endeavour to secure the ressources and manufacture them. Any future technology be it AI or quantum computing need ever more advanced chips as a propellant. Everyone involved in the semicon industry is fighting tooth and nails to secure their share of that money pot.

Microchips translate into economic and military power and global supremacy. The Western bloc (Japan, Korea, Taiwan included) can‘t ignore rising China. It‘s an ongoing war on the technological battlefield.
 
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unlimited human capital and money is not an issue either

Actually both of these are fast turning into issues.

A) The protracted malthusian intervention by the CCP permanently wrecking their demographic pyramid and its consequence especially after 2030.

B) The massive (again protracted) structural skewing of investment towards real estate and saddling local provincial govt with this, by largely controlling other forms of investment (found in a true market economy), simply because real estate soaks up large amounts of labour. So money will certainly become an increasingly larger problem for the CCP given where things already are now and with both foreign populations and domestic populations becoming more aware of the reality of the CCP flawed strategy and its consequences. There is already a 20% youth unemployment figure that is cropping up and thats just the official figure.

The window is fast closing on the CCP as there is simply no further impetus to change something structurally after what was done in the 80s - 90s. In fact there is a growing counter push against service innovation and any kind of basics that require bureaucratic overlap....squandering vast portions of wealth creation in the name of political control (Xi overall is emblematic of this).

In the end in current low MVA cookie cutter factory + real estate oriented model.....every dollar produced inside China produces further more dollars in western market cap as CCP simply is too fearful of its population to open up here. The capital controls are where they are for the asserted (like 40-60% overcounted already) average income level for a reason.
 

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Beijing's curbs on niche metal exports threaten China supply glut​


China faces a growing surplus of two strategic metals if Beijing restricts exports, industry players said, weighing on domestic prices even as overseas prices of the thinly traded minerals jumped this week.

China's Ministry of Commerce said on Monday it will impose export controls on gallium and germanium from Aug. 1, used in semiconductors, satellite imagery sensors and light-emitting diodes (LED) and other applications, ramping up a tech battle with Washington.

Producers initially pushed up their offer prices for gallium by as much as 20% to 2,000 yuan ($275.93) per kilogram (kg) and 4% to 10,000 yuan per kg of germanium, according to two traders dealing in the metals and two producers.

Still, some sellers showed little interest in making any compromise on offers in anticipation of further price rises in July, said one gallium trader, while buyers have resisted attempts to increase prices.

Gallium prices in China have dropped 12% this year, pressured by its slowing economy.

China accounts for about 85% of global consumption of gallium and expanded its production capacity to nearly 1,000 metric tons last year, leaving it with a surplus of 25 metric tons that it tried to ship abroad, according to state-backed research firm Antaike.

"The market would likely have been bearish without these changes," said Theo Ruas, global sales manager at Indium Corporation, a U.S.-based refiner of raw materials for the electronics sector.

Prices of gallium with 99.99% purity in China rose 6% after Monday's news to 1,775 yuan ($244.86) per kg but has not changed since then, according to Shanghai Metal Exchange data on Refinitiv Eikon.

China's germanium ingot price has advanced only 1% to 7,250 yuan per kg since Monday.

Overseas price offers are rising much faster, amid fears that Beijing may use the permitting system to restrict shipments.

The price jump is expected to be "relatively short-lived", however, said Willis Thomas, consultant at London-based consultancy CRU.

Both metals can be produced from by-product sources, but a recovery has not yet been seen for economic reasons, he added.

For now, much depends on how hard it is to obtain a license. Other metals such as indium are also subject to the permits but face little restriction, Indium Corp's Ruas said.

LICENCE TO SHIP​

Under the controls, widely seen as a retaliation for U.S. curbs on sales of key technologies to China, exporters must obtain a license to ship several forms of the metals overseas, which requires details of end-use applications.

China has given few details on how the process will work, and its commerce ministry said on Thursday that there had been no applicants so far.

The commerce ministry was due to hold a meeting with producers on Thursday, Reuters reported previously.

"Export control does not mean export prohibition, and those that comply with relevant regulations will be permitted. The Chinese government enforces export controls that do not target any particular country," spokesperson Shu Jueting told a weekly press conference.

China produces around 60% of the world's germanium, and over 90% of the world's gallium.

 

Bogeyman 

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Factbox: China's major germanium and gallium producers​


China has announced export restrictions to take effect from Aug. 1 on some gallium and germanium products, metals used in computer chips and other products, citing national security interests.

China produces around 60% of the world's germanium, or 180 metric tons in 2022, and over 90% of the world's gallium, about 606 tons last year, according to research firm Antaike.

Output of both metals rose 16% in 2022, the firm says.

Here are some facts about major germanium and gallium producers in China.

YUNNAN GERMANIUM, AN ESTABLISHED PRODUCER​

Headquartered in southwest China's Yunnan province, Yunnan Lincang Xinyuan Germanium Industry Co. Ltd. (002428.SZ) extracts germanium from its own germanium mines and germanium-containing lignite coal mines.

It has an annual capacity of 47.6 metric tons of germanium ingot, 60 tons of germanium tetrahydride - used to build 5G infrastructure - and 300,000 germanium wafers for solar cells.

The company, which saw its shares hit the upper trading limit three days in a row since Monday, reported a net loss of 62.4 million yuan ($8.62 million) in 2022, citing falling prices amid dwindling demand at home and abroad.

YUNNAN CHIHONG, A GROWING GERMANIUM PRODUCER​

Yunnan Chihong Zinc & Germanium Co (600497.SS), a subsidiary of state giant Aluminum Corporation of China (Chinalco) (601600.SS), says it is China's top producer of primary germanium, with output of 56 metric tons of germanium products in 2022.

It has proven germanium resources linked to lead and zinc ores of over 600 metric tons, accounting for around 17% of the country's total, it says.

The company's main business is producing zinc, lead, silver, gold and other products but it increased germanium production by almost 10 tons last year.

It also started a production line for optical fiber ultra-high purity germanium tetrachloride, with annual output of 30 metric tons.

CHINALCO, A MAJOR GALLIUM PRODUCER​

State aluminium giant Chinalco has three gallium production plants, one each in central China's Henan and southwestern Guangxi and Guizhou provinces.

It has annual production capacity of 200 metric tons of gallium metal and produced 146 metric tons in 2022.

Chinalco Chairman Duan Xiangdong said in April the company aims to "nurture" leading minor metal companies, according to a statement on its website that did not provide further details.

OTHER GALLIUM PRODUCERS​

Shanghai-based aluminium and alumina producer East Hope, Zhuzhou Keneng New Material Co Ltd based in Zhuzhou in central China's Hunan province and Zhuhai Fangyuan based in southern Guangdong province also make the metal.

Shanxi province-based Xiaoyi Xingan Gallium Industry Co. Ltd is a joint venture between Xiaoyi Xing'an Chemical Co. and Nanjing Jinmei Gallium Industry Co. Ltd., a subsidiary of U.S.-based semiconductor wafer maker AXT Inc (AXTI.O).

China is the world's top aluminium producer and gallium is made during the processing of alumina into aluminium.

 

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Copying ASML, means copying decades of research and operational excellence not only at ASML, but the optics from Carl Zeiss or Lasers from Trumpf. In the past China (and Taiwan, Japan, S. Korea) bought foreign technology in the west and went from there, building their own industries and universities. I doubt China will get their hands on anything good in the west for the next decades.

But we're talking about China, unlimited human capital and money is not an issue either. So they might eventually get there, but it wont be taking the easy way this time.
The Japanese are working on a simpler way of producing chips,lets wait and see.
 

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