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Despite U.S. sanctions, China may be advancing in chip production but unfortunately still confronts major hurdles.

ByYasmeeta Oon

Feb 13, 2024

Despite U.S. sanctions, China may be advancing in chip production but unfortunately still confronts major hurdles.

In a move that signals a significant leap in China’s semiconductor ambitions, Semiconductor Manufacturing International Corporation (SMIC), the nation’s premier chipmaker, has reportedly been producing advanced chips, undeterred by stringent US sanctions aimed at impeding Beijing’s technological advancement. This development raises questions about the sustainability of China’s efforts to achieve self-reliance in the semiconductor industry amidst global technological competition.

Defying Expectations: SMIC’s Technological Breakthrough

Despite the US’s concerted efforts to stifle China’s progress in the semiconductor domain through sanctions and trade restrictions, SMIC appears to have made considerable strides. Last year, the company was instrumental in the launch of Huawei’s Mate 60, a smartphone that boasts 5G capabilities powered by a chip utilizing a 7 nanometer (nm) process. This process, which refers to the size of individual transistors on a chip, is critical because smaller transistors allow for more densely packed, efficient, and powerful semiconductors.

The Scale of Advancement

The Financial Times recently revealed that SMIC is expanding its production capabilities to include 5 nm chips, predominantly for Huawei. This move is significant as it indicates a progression towards more sophisticated technology, inching closer to the cutting-edge 3 nm process used in Apple’s high-end iPhones. The advancement from 7 nm to 5 nm is a testament to SMIC’s relentless pursuit of semiconductor excellence, despite the barriers erected by US sanctions.

Navigating Through Sanctions

The US has employed a variety of sanctions and trade restrictions to curb China’s semiconductor capabilities. SMIC was added to the US trade blacklist in 2020, severely limiting its access to foreign technology essential for manufacturing advanced chips. Furthermore, the US has been instrumental in persuading other nations to adopt similar restrictions, with notable measures from the Netherlands affecting the export of critical semiconductor manufacturing equipment, including the advanced EUV (extreme ultraviolet) lithography machines produced by ASML.

Table: SMIC’s Semiconductor Milestones vs. Global Standards

MilestoneSMIC’s AchievementGlobal Standard
Chip Process7 nm and progressing to 5 nm3 nm (used in Apple’s iPhones)
Sanctions ImpactRestricted access to advanced toolsUnrestricted access for global competitors
Equipment UseOlder chipmaking tools for advanced chipsCutting-edge EUV lithography machines
Cost Comparison40%-50% higher for 5 nm and 7 nm processes than TSMCCompetitive pricing by TSMC at the same nodes

The Path to Self-Sufficiency: SMIC’s Strategy and Challenges

SMIC’s ability to produce 7 nm and potentially 5 nm chips using existing stocks of semiconductor equipment, including those made in the US and the Netherlands, highlights its innovative approach to overcoming external pressures. The company is reportedly collaborating closely with domestic tool makers and leveraging expertise from partners like Huawei to enhance its process yields.

Key Challenges and Responses

  • Technological Barrier: Without access to the latest EUV lithography machines, SMIC faces significant hurdles in manufacturing the most advanced chips cost-effectively.
    • Response: Utilizing older equipment and innovative techniques to produce advanced semiconductors, albeit at higher costs and lower yields.
  • Cost and Yield: The reliance on older technology results in higher production costs and lower yield rates, affecting the competitiveness of SMIC’s chips.
    • Response: Possible government subsidies and increased investment to mitigate the cost disadvantages and improve yields.
  • International Sanctions: US and allied nations’ restrictions severely limit SMIC’s access to cutting-edge semiconductor manufacturing technology.
    • Response: Strengthening domestic capabilities and seeking alternative sources for critical technology and expertise.

Despite these challenges, SMIC’s advancements signal a critical shift in the global semiconductor landscape. The company’s success in developing more advanced chips, even under the shadow of international sanctions, underscores China’s commitment to becoming a key player in the global semiconductor industry.

However, the journey towards technological self-sufficiency is fraught with obstacles. The increased production costs and the struggle to maintain high yields with older equipment pose significant challenges to SMIC’s competitiveness on the global stage. Industry experts like Pranay Kotasthane suggest that while financial investments can temporarily alleviate these issues, the quest for a sustainable solution, particularly access to advanced EUV lithography machines, remains imperative for China’s semiconductor ambitions.

A Steely Resolve Amidst Global Tensions

As technological competition intensifies, the developments at SMIC represent more than just advancements in semiconductor manufacturing; they are emblematic of China’s determination to forge its path in the high-stakes realm of global technology. The nation’s ability to innovate in the face of restrictions not only challenges the efficacy of US sanctions but also highlights the dynamic nature of the global semiconductor industry. However, as the technological race accelerates, the sustainability of China’s approach, reliant on overcoming escalating costs and technological barriers, becomes a crucial factor in determining its position in the global semiconductor hierarchy.

Featured Image courtesy of DALL-E by ChatGPT

Yasmeeta Oon

Just a girl trying to break into the world of journalism, constantly on the hunt for the next big story to share.