China Struggles to Crack Chip Manufacturing

Article By : John Walko

China is very far from meeting its target of independence in semiconductor manufacturing anytime soon.

There is little that epitomizes more succinctly the problem Chinese companies face in delivering on the country’s aspirations to become a major force in the supply of advanced semiconductors than Semiconductor Manufacturing International Corp.’s (SMIC) announcement last week of an $8.9 billion investment in a new fab in Shanghai that will deploy 28nm technology.

While a significant expansion, that will still be several generations behind the nodes being deployed by many of the existing and planned fabs in the US, Europe, and other parts of Asia.

Semiconductor Manufacturing International Corporation (SMIC)

The reason is obvious. SMIC is banned from deploying the most advanced lithography equipment as a consequence of being near the top of the Entity List – the embargo by the US government in the on-going trade war between the two giant economies.

By comparison – and stark contrast – Intel, TSMC and Samsung, for instance, are already making devices on 5nm technology. Indeed both the former have recently announced plans for making chips on a 3nm process by the time SMIC’s 140,000 wafers a month facility comes on stream, expected to be within three years.

Pat Gelsinger, Intel’s CEO, talking at the IAA Mobility Congress in Munich, Germany, last week, committed the company to producing devices with 16nm technology at its next lines in Ireland. These will be the third at the Leixlip, County Kildare complex, and Gelsinger confirmed Intel is planning two mega-fabs in Europe over the next decade with a projected investment of €80 billion.

Leading contenders for the fabs are thought to include France, Germany, Poland, and the Netherlands.

All this means China is very far from meeting its target of independence in semiconductor manufacturing anytime soon.

Having said that, SMIC had little option but to push ahead, with its fabs currently running at full capacity.

Senior executives at SMIC have many times bemoaned that the US-imposed ban has significantly limited its – and other Chinese companies’ – expansion plans, just when there is a global shortage of semiconductors holding back advances in many industrial sectors, notable automotive, game consoles, and even mobile phones.

Analysts, however, suggest that by the time the latest SMIC plant for highly commoditized markets comes on stream, these shortages are likely to have eased.

And certainly there is, and will continue to be, a huge market for a fab that will churn out devices for gear such as Wi-Fi routers, microcontrollers, image sensors and more, and at competitive prices. But this means SMIC will be competing against arch rivals in the foundry business such as TSMC and, increasingly, Intel, who are also able to supply chips targeting sectors that require much more advanced and less commoditized sectors.

There is little doubt Chinese companies, and leaders, are keen to rectify a situation where none of its leading chip makers rank in the top 15 globally. By sales, there are eight from the US, two in each of Europe, South Korea and – most gallingly for mainland China – Taiwan, with just one left in Japan in this elite group.

To change the trend and the situation, and make it possible for China to achieve its often-cited ‘Made in China 2025’ goals, there would need to be some serious political changes of heart in Washington as regards some form of rapprochement between the two: This seems most unlikely in the current state of affairs.

The only other way forward would seem to be for China to develop its own capability to design and make world-class chip manufacturing equipment. This is also very tough ask: Just ask the few companies in the US, Japan and Europe who have mastered the technology to etch transistors on to silicon at sub-nanometer scale.

The question is not simply one of money, but the ready availability of engineers with the appropriate skills.

This article was originally published on EE Times Europe.

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