China has long sought shortcuts to developing semiconductor technologies and local supply chains by poaching engineers and experts from Taiwan and other nations. It is also suspected of stealing trade secrets from Taiwanese and US firms to fulfill its ambition of becoming a major player in the global semiconductor industry in the next decade.
However, it takes more than just money and talent to build a semiconductor supply chain like the one which Taiwan and the US started to cultivate more than 30 years ago.
Amid rising trade and technology tensions between the world’s two biggest economies, Beijing has become more desperate to develop its own chip industry, given that the US, as of today, has cut off Huawei Technologies Co’s access to chips by placing the firm and its subsidiaries on Washington’s “entity list.”
The list requires US and foreign firms to obtain a US license to ship semiconductors to Huawei. Being on the list will disrupt Huawei’s efforts to develop semiconductors through its subsidiary HiSilicon Technologies Co and likely hurt its cellphone business.
To comply with the new US rules, Taiwan Semiconductor Manufacturing Co (TSMC), HiSilicon’s major chip supplier, has said that it would stop chip shipments to the firm starting today. That means Huawei will not have an assured chip supply for its flagship 5G smartphones, although HiSilicon designs its own-brand Kirin chips used in Huawei’s smartphones.
US President Donald Trump’s administration is mulling expanding its export curbs to other Chinese firms, such as Semiconductor Manufacturing International Corp (SMIC), China’s biggest foundry, to further hamper Beijing’s ambitions.
A ban would thwart SMIC’s efforts to develop 7-nanometer technology, as ASML Holding NV has suspended shipments extreme ultraviolet lithography tools to the Chinese chipmaker due to pressure from the US.
ASML, headquartered in Veldhoven, Netherlands, is the sole supplier of the extreme ultraviolet equipment required to make 7-nanometer chips cost-effectively.
A wider US ban could end China’s dream of becoming a major global semiconductor supplier, even as Beijing’s efforts to take center stage in the industry appear to be fizzling out.
Wuhan Hongxin Semiconductor Co (HSMC), which was once considered the rising star of China’s semiconductor industry and a frontrunner in the race to catch up with TSMC, is on the brink of collapse due to financial woes.
Two years ago it tapped former TSMC joint chief operating officer Chiang Shang-yi (蔣尚義) to be chief executive as it aimed to develop 7-nanometer technology and join the ranks of TSMC, Samsung Electronics Co and Intel Corp, which already offer such chips. It also reportedly poached a number of TSMC engineers over the past year.
Had it succeeded in developing 7-nanometer technology, Wuhan-based HiSilicon would have had an alternative chip supplier and the US restrictions would not have posed a major threat to Huawei’s handset business.
However, without a fresh capital injection soon, HSMC operations are likely to grind to a halt. It has seen its newly purchased deep ultraviolet lithography tool and some of its land and equipment seized by creditors after it missed payment deadlines.
Media reports say Chiang is reportedly considering quitting.
China was never likely to become a major semiconductor supplier overnight, as the US has dominated the industry for decades in terms of equipment and software, but it looks increasingly clear that China is not going to be able to boost self-sufficiency in semiconductor equipment to 70 percent by 2025, given the US bans.
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