For the United States and other countries to restrict China’s semiconductor industry, the recent statement of the China Semiconductor Industry Association triggered public discussion. Among them, there is a view that has won a lot of approval: the world follows the law of the jungle and does not need to expect mercy from anyone.
The United States always talks about subsidizing its own semiconductor enterprises in the name of “solving the problem of chip shortage”, but essentially the purpose of the United States is to break away from dependence on Asia, especially Chinese Mainland and Taiwan, China. The cost of building a “wafer factory” in the United States is 40% to 70% higher than that in overseas countries. Subsidies are the only answer for the United States to reverse its 40-year decline in semiconductor production. American media said it was time to realize that the United States was no longer a “seller” that could afford high corporate tax, strict regulation and no investment incentives. The United States is now a desperate buyer. If it wants to build a wafer factory in the United States, the United States government will have to help pay the cost.
The chip bill, which was finally passed, did not arouse the enthusiasm of American semiconductor companies at the beginning. One reason is that the Chip Act prohibits companies from repurchasing shares with subsidies. If a chip company obtains US $3 billion from the Ministry of Commerce to help offset the cost of the wafer factory, it will need every penny to pay for the higher operating and capital expenditure it will face in the United States, and shareholders will have nothing. This effect forced the US government to “increase” other ways to develop its own semiconductors, so the US began to unite with other countries to restrict the export of semiconductors to China.
This kind of operation logic is not difficult to understand: it is not as difficult to develop our own industry as to “slow down” others. The United States first formed the Chip4 alliance, and then joined forces with Japan and the Netherlands to restrict the export of semiconductor equipment to China in 2023. Although countries seem to have complied with the requirements of the United States, for whom does the abacus ring?https://forum.stoneitech.com/
01
The dilemma of the Netherlands, Japan and South Korea is “serving the other side”
The Dutch export lithography machine “safeguarding multilateralism” is limited
The Dutch semiconductor manufacturing equipment manufacturer ASML has a 100% market share in the EUV (extreme ultraviolet) lithography field. In January 2023, ASML said that the rules on export control to China were “being finalized”. As of the press release, there is no official explanation or refutation of the so-called details of the agreement.
This triggered a discussion in the Chinese semiconductor industry. After all, if the ASML lithography machine cannot be exported, it will greatly hit the Chinese semiconductor manufacturing sector, especially the catch up of Chinese semiconductors in the advanced manufacturing process. However, the subsequent operation of the Netherlands seems to indicate that there is still room for cooperation with China.
On February 18, Wang Yi, member of the Political Bureau of the CPC Central Committee and director of the Office of the Central Foreign Affairs Working Committee, met with Deputy Prime Minister and Foreign Minister Hukstra of the Netherlands during his attendance at the Munich Security Conference. Hukstra said that the world is interdependent, and all parties have the responsibility to firmly uphold multilateralism and support multilateral mechanisms and international rules. I am glad to see that China has overcome the epidemic, the economy has recovered strongly, and foreign exchanges and cooperation have resumed rapidly. We look forward to close exchanges and expanded cooperation with China. The Netherlands is willing to continue to be a reliable and stable partner of China.
As for whether the Netherlands will choose to “follow” the United States wholeheartedly, Dutch experts said that “the Netherlands will not blindly follow the United States”. In fact, Europeans do not want to see the United States isolate China. Take the Inflation Reduction Act issued by the United States as an example, according to which the United States government can provide high subsidies for local industries. American products will gain competitive advantages, while other domestic products will have no foothold due to the lack of a fair competition environment. In fact, the EU recently announced potential counter-measures against the Inflation Reduction Act.
Japan should maintain cooperative relations with China
In addition to the Netherlands, Japan, which has many large manufacturers of semiconductor manufacturing equipment, has also been attracted by the United States. The Biden government of the United States strongly urged Japan to cooperate in strengthening control, so the report said that the Japanese government would start to control the export of cutting-edge semiconductors. Japan’s advantages mainly lie in the fields of semiconductor manufacturing equipment, wafer manufacturing and materials. According to the prediction of the American Semiconductor Industry Association, the global market share of semiconductor manufacturing equipment in Japan will reach 27% in 2021, and the market share of wafer manufacturing and materials will be about 16% and 14%. In the context of the US and China’s scramble for technological hegemony, with the return of the US manufacturing industry to China, the fear that the manufacturing equipment and materials industry will shift overseas is growing. Japanese media have noted that most Japanese semiconductor companies are negatively affected by Japan’s adherence to U.S. restrictions on exports to China. The proportion of operating revenue of Tokyo Electronics from China may fall to 22%, down about 5 percentage points year on year.
There is a constant relationship between China and Japan’s economy, and Japan must balance itself in the gap between the United States and China. In order not to over-stimulate China, Japan will not name China in its control measures. According to the analysis of Japanese industry personages, this is because “it is difficult to deny that the situation of being sued to the World Trade Organization or other industries will suffer as long as a little handle is caught”. At present, based on the Foreign Exchange Law, the export of some manufacturing devices has been required to apply for a license, which may be expanded in the future. It is expected that the content of Japan will be more moderate than that of the United States.
Japanese Prime Minister Mansuo Shoda called on China to establish a “constructive and stable relationship”. “For Japan, the United States is the most important ally, but I think Japan cannot keep in line with the policies of the United States in some aspects. It is impossible for Japan to split China, the largest trading partner.”
South Korea asks the United States to grant amnesty and wants to sell China
South Korean media published an article saying that the fallout from the US semiconductor restrictions on China is shifting to the Korean equipment industry. The core semiconductor equipment manufactured by the United States, Japan, the Netherlands and other countries is difficult to enter China, so the export of Korean equipment used together is also blocked.
In terms of equipment, Korean enterprises provide China with more auxiliary process equipment systems than necessary process equipment, such as equipment for adding additional functions or thermal control of main equipment, measurement, inspection, cleaning equipment, etc. In addition, South Korea has sold many sealing and testing equipment to China. With problems in the operation of Chinese chip factories, the sales of Korean equipment enterprises will also be affected.
A South Korean semiconductor equipment enterprise said: “Although it is predicted that due to the restrictions of the United States, the vacancy of global equipment enterprises will be filled by South Korean enterprises, but with the shrinking of the Chinese market itself, opportunities are being lost.” If the sales of South Korean semiconductor equipment decreases, this will also affect the enterprises in the upstream of semiconductor manufacturing equipment, such as semiconductor materials, semiconductor equipment parts and other fields. Because Korean semiconductor equipment enterprises mainly purchase a large number of raw materials and parts in Korea. The representative of Korean semiconductor consumables enterprises said: “The aftereffect of semiconductor restrictions in the United States has been felt since the second half of last year. Korean small and medium-sized enterprises will also be hard to avoid being affected.”
For Korean semiconductor enterprises, it is not only small and medium-sized companies that are nervous. Even semiconductor giants such as Samsung Electronics and SK Hynix cannot leave the Chinese market. In February, South Korean media said that executives of South Korean enterprises went to the United States, hoping to win the exemption from the Chip Act and continue to ship to China. The South Korean media also said that the South Korean government supported the emergency dispatch of senior executives from two major South Korean enterprises to the United States.
It is not difficult to see that even if the three countries agreed to some requirements of the United States, they could not draw a clear line with the Chinese market.
The semiconductor jungle has become “everywhere”
In fact, at the moment when all countries have increased their efforts to develop semiconductors, all countries are in semiconductor anxiety.
The UK, which has already left the EU, needs to create a level playing field with participants such as the United States, the European Union, and China, which is not a small pressure on British local enterprises. For several months, British chip manufacturers have been calling on the British government to take action. British chip companies, including Pragmatic Semiconductor, IQE and Paragraf, expressed disappointment that the British government failed to put forward plans to support the semiconductor industry in the region. British chip manufacturers threatened to transfer their business to the United States or Europe if the British government did not take action and released the long-awaited semiconductor strategy.
Some countries want to remain neutral and develop silently; There are also countries that hope to embrace the “thigh” of the United States.
The Indian Electronics and Semiconductor Association (IESA) and the American Semiconductor Association announced plans to establish a private sector working group to strengthen cooperation between the two countries in the global semiconductor ecosystem. The specific objectives of the working group include: to develop a “readiness assessment” on the semiconductor ecosystem in India; Gather industry, government and academic stakeholders to identify recent industry opportunities and promote the long-term strategic development of complementary semiconductor ecosystem; Put forward suggestions on opportunities and challenges to enhance India’s role in the global semiconductor value chain (including chip manufacturing); Identify and promote opportunities for labor development and exchange to benefit both countries.
John Neuffer, President and CEO of SIA, said, “We are pleased to launch this new plan with our peer IESA in India. India has become the main hub of semiconductor research, chip design and equipment engineering, but its future potential is greater. The working group will help determine practical ways to release this potential by strengthening the cooperation between the United States and India in the global chip ecosystem.”
On the face of it, the United States gave India tickets, but a study published in the journal Sustainable Development in 2021 showed that most of the waste from the electronic industry in developed countries was accumulating in India. Their research cites data from the United Nations Environment Programme (UNEP), indicating that only 10% of the e-waste generated in the world today is recycled in developed countries, and the remaining 90% is sent to developing countries worldwide. Indian media believe that in the end, India may only be a “waste dump” used by developed countries to transfer electronic pollution.
In the jungle of semiconductor industry, we have to fight our own way.
02
China Semiconductor walked out of the “dark forest”
The “Silicon Iron Curtain” is causing a crisis, and China is the party most directly affected. When the United States introduced the Chip and Science Act and used national power to suppress Chinese enterprises, free trade ceased to exist.
What about China Semiconductor? Developing basic science may be the fundamental way to get rid of this situation.
Recently, an article in the journal of the Chinese Academy of Sciences pointed out that the lack of basic research on semiconductors has led us to enter the “dark forest”. Even if a large amount of investment is made to replace domestic products, it can only achieve internal circulation or narrow the gap with the United States. The article suggests that strengthening the construction of semiconductor basic capacity, stabilizing a group of semiconductor basic research teams, carrying out theoretical innovation at the source and bottom of semiconductor technology, and arranging patents and setting “checkpoints” in advance at the chip bottom that cannot be bypassed are an effective strategy to solve the “bottleneck” problem of semiconductor key core technology.
According to the article published by the Chinese Academy of Sciences, China’s investment in basic research and development of semiconductors has been less than 5% of that of the United States for a long time. This comparison reminds the Chinese semiconductor industry that it is time to transcend the gorgeous listed company numbers and financing amounts to face the essential gap. To achieve a high level of scientific and technological self-reliance, we must strengthen basic research. Strengthening basic research means improving the scientific research system and high-level basic research talent training platform, which may be a new starting point.
The development of semiconductors is a long and difficult road. The darkness before dawn is the most difficult, but the day will always be bright.
