Under the latest trade regulation, fabless semiconductor companies are worried they will be the next target of sanctions by the United States...
The U.S. has issued a new set of trade rules that hamper American-made semiconductor equipment sales to China. As a result, telecom and networking giant Huawei Technologies reportedly is trying to persuade Samsung and TSMC to build an advanced production line that does not use U.S. equipment.
Under the latest trade regulation, fabless semiconductor companies are worried they will be the next target of sanctions by the United States.
TSMC should strongly support non-U.S. semiconductor material and equipment suppliers, according to industry analyst Lu Xingzhi. However, TSMC – which announced it would build a fab in the U.S. – seems hesitant to act on Huawei’s request.
Samsung seems to be more active in this regard. Media reports say Samsung has cooperated with equipment manufacturers in Japan and Europe to build a small, 7nm production line that doesn’t use U.S. equipment. Samsung hopes to actively attract multiple customers through this move.
Is it really possible to build a chip production line without American equipment? Let’s analyze reporting from EE Times.
According to SEMI, the top five equipment manufacturers in the world represent 65% of the global market. These companies carry capital, technology, customer resource and brand advantages. Among them, America’s Applied Materials ranked first with a market share of 17.7%; Lam Research ranked fourth with a 13.4% market share and KLA-Tencor, with 5.19%, ranked fifth. Collectively, the three companies represent 36.31% of the global semiconductor equipment market.
In lithography, ASML has an oligopoly on equipment. Applied Materials, Tokyo Electronics and Pan Lin Group are leaders in plasma-etching and thin-film-deposition machinery. KLA is a leading enterprise in testing equipment.
At the beginning of the semiconductor manufacturing process, monocrystalline silicon wafers are turned into chips. This procedure requires oxidation, coating, photolithography, etching, ion implantation, physical vapor deposition, chemical vapor deposition, polishing, wafer inspection and cleaning. Back-end processes include packaging and testing, backside thinning, wafer cutting, patching, wire bonding, molding, cutting tendon/forming, and final testing.
EETimes China, a sister publication of EE Times, takes a look at semiconductor manufacturing equipment and its leading vendors. Data was compiled from SEMI and Ping An Securities Institute:
Oxidation/ RTP /laser annealing
Applied Materials, Hitachi, Japan, Tokyo Electronics, Thermco, UK, Naura Technology Group Co., Beijing E-Town Semiconductor Technology
Glue development equipment
Tokyo Electronics, Deans, Germany SUSS, Austria EVG, Shenyang Kingsemi
ASML, Nikon Japan, Canon Japan, Tokyo Electronics, Applied Materials, Panlin Group, SEMES Korea, Shanghai Micro Electronics Equipment (Group) Co.
Plasma etching machines
Pan Lin Group, Villian Semiconductor, Tokyo Electronics, Applied Materials, Hitachi, Japan JuSung, South Korea TES, AdvancedMicro-Fabrication Equipment Inc. China, North China Chuang
Applied Materials, American Axcelies, German Ingun, American QA, American MicroXcat, Korean Leeno, Shanghai Kingstone Semiconductor, Beijing Zhongkexin Electronics Equipment, China Electronics Technology Group Corp.
Physical vapor deposition
Applied Materials, Japan Evatec, Japan Ulvac, America Vaportech, Britain Teer, Switzerland Platit, Germany Cemecon, Beijing NMC Co., Sky Technology Development Co., Chengdu Rankuum Machinery, The 48th Research Institute of CETC, Cross-Tech Equipment Co.
Chemical vapor deposition
Applied Materials, Panlin Group, American GT, Soitec, American ProtoFlex, French Semco, ASML, Tokyo Electronics, Nikon Japan, Canon Japan, North China Chuang, Shenyang Piotech Co.
Applied Materials, American Rtec, Japanese Evatec, HWatsing Technology, The 45th Research Institute of CETC, ACM Research
Wafer inspection: electrical inspection equipment, quality inspection equipment
Teradyne, Advantech, Tokyo Electronics, Corey Semiconductor, Applied Materials, Hitachi, Japan, Hangzhou Changchun Technology, Beijing Huafeng Test & Control Technology Co., Shanghai Zhongyi Automatic System Co., RISC Scientific Instrument (Shanghai) Co., Shanghai Jingce Semiconductor
Japan Deans, Tokyo Electronics, Panlin Group, South Korea SEMES, North China Chuang, Shengmei Semiconductor, Pnc Process Systems Co., Shenzhen S.C. New Energy Technology Corp.
Although it is theoretically feasible to build a semiconductor production line without American equipment, Japanese, European and even domestic equipment doesn’t lead in many of these areas.
The key equipment for semiconductor manufacturing is basically monopolized by American and Japanese companies. Although China’s chip manufacturing industry has a foundation and customers, there is still a large technical gap with the West, particularly in the areas of high-end process chips, single crystal furnaces, oxidation furnaces, CVD equipment, magnetron sputtering coating equipment, CMP equipment, lithography machines, coating/developing equipment, ICP plasma etching systems, probe stations and other equipment markets.
The establishment of customized production lines in China remains an unconfirmed rumor.
EE Times has also reported that Huawei is trying to purchase mobile phone processors from MediaTek and Samsung. Supply requirements are expected to be introduced formally in the second half of the year.
MediaTek reports “an internal tendency to apply to the United States for export approval.” Industry insiders report that Samsung, in the past, has rejected Huawei’s request to purchase Exynos processors. Samsung may again do so.
Why would Samsung build a chip production line for telecom competitor Huawei? TSMC only manufactures OEM chips and does not compete with customers. Analysts pointed out that this feature appeals to many technology companies.
Even if Samsung and TSMC have the ability to build a non-US chip production line, they are not afraid to take orders from Huawei’s HiSilicon. But Huawei’s order could change the competitive landscape of the chip foundry industry.
The maneuvers so far:
On May 26, the Nikkei Asian Review published an article entitled “As the United States Fights Huawei, Samsung and TSMC’s Competition Heats Up”, saying that the U.S. Department of Commerce announced new regulations to attack Huawei’s chip supply chain.
TSMC announced that it will open a new 5nm factory in the United States. The plant is scheduled to start construction in 2021 and start production in 2024. Total expenditure will reach approximately US$ 12 billion in the next 10 years. According to TSMC, their 5 nanometer investment in Taiwan has reached 23 billion US dollars.
At the same time, Samsung announced it will open a new production line in Pingze City, south of Seoul, and begin mass production of 5nm chips in the second half of next year. Previously, Samsung had planned to start producing this chip on the production line in Hwaseong, South Korea this year.
The report said that the two Samsung production lines will use the most advanced ultraviolet technology for chip manufacturing, and that Pingze’s new production line will invest approximately US$8.1 billion. Samsung also promised to invest about US$107.7 billion in chips and its foundry business by 2030.
For Samsung, who has always wanted to become its own chip foundry boss, the “Huawei Incident” is an opportunity. However, Samsung first needs to address customer concerns: they worry that Samsung, while becoming a competitor with TSMC, is too dependent on TSMC.
For example, TSMC used to share OEM orders for iPhone mobile phone processors with Samsung, but now TSMC has become an exclusive supplier. Although Apple will still buy advanced panels and memory from Samsung, it will avoid over-reliance on Samsung in terms of key processors because Samsung phones are one of the iPhone ’s biggest competitors.
Huawei may provide Samsung with chip OEM orders, but Huawei also competes with Samsung in the smartphone and telecommunications equipment business.
Eric Chen, senior semiconductor analyst at Juxin Capital, said: “Samsung is definitely a strong competitor of TSMC. However, Samsung is also a huge empire that manufactures electronic devices. No technology company or chip developer in the world would want to buy key chips from opponents. This is a problem that Samsung must face. ”
Trendforce reports TSMC holds half of the global chip foundry market. Samsung has a 15% share. The two companies are fiercely competing in the field of high-tech chips, because the smaller the chip size, the higher the technical content and the higher the cost. TSMC’s production base in Taiwan is about to mass produce 5-nanometer chips.
Eugene Investment & Securities analyst Lee Seung-woo believes that Samsung ’s most important issue today is how to maintain a stable customer base. Samsung should carefully formulate its mid- to long-term strategy so that it can regain its past key customers such as Apple and Xilinx while expanding orders from existing customers such as Qualcomm and Nvidia.
The same day that the U.S. Department of Commerce announced the new trade regulations, SMIC announced a new round of capital and expansion of SMIC South.
SMIC South is a 12-inch round crystal plant, which mainly meets the R&D and mass production of SMIC’s 14nm and below processes.
Everbright Securities analysts pointed out that while Huawei’s mobile phone chips can compete with Apple and Qualcomm, it is inseparable from TSMC’s advanced manufacturing process. If TSMC really distances itself from Huawei, Huawei can only rely on chips from SMIC and other manufacturers. Some analysis point out that this is a rare opportunity for the mainland semiconductor industry. But there are also reports that Huawei’s business eats up most of SMIC’s capacity. This can delay orders from some small and medium-sized IC design companies in China.
Balancing on this double-edged sword is a problem Huawei and SMIC will face in the future.
— Luffy Liu is Associate Chief Analyst of EETimes China.