SHANGHAI/HONG KONG: Since the U.S. government put Huawei Technologies Co Ltd on a trade blacklist, effectively banning American firms from doing business with it, China's leaders have spoken boldly about achieving self-sufficiency in the critical semiconductor business.
"Compared to the constraints of equipment, materials, or talent, I think what China lacks more is understanding of the industry," says Gu Wenjun, chief analyst at Shanghai-based consultancy ICWise. He called some of the government subsidies for the industry"counter-productive", because too many well-funded ventures end up chasing the same talent.
One of China's biggest challenges, however, is in chip manufacturing, an exacting process that requires both highly specialized tools and many years of experience to master."The manufacturing process relies on equipment, and U.S. firms such as AMAT, LAM, KLA and Teradyne have very high market share in many niche markets," Everbright wrote."There is no production line in China that uses only equipment made in China, so it is very difficult to make any chipsets without U.S.
The manufacturing process for advanced chips requires a lot of fine-tuning, and the NDAs covered the crucial tips and tricks on how to best use the machinery and achieve the necessary levels of"yield", or the number of working chips in each batch. Industry experts say SMIC is consistently about two generations behind TSMC, even with up-to-date equipment. While TSMC was launching chips with circuit widths of just 7 nanometers in 2018, SMIC is only now readying production of 14 nanometer chips - which was state-of-the-art in 2014.
China's CXMT, a maker of DRAM memory chips, tried to recruit a former top Samsung Electronics chip engineer last year, but the South Korean firm obtained a court injunction to block the move this January.