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Why is China struggling to make chips in 2020

China is losing its chip-making bet, strongly skeptical of its technological self-reliance, and listing some of the reasons why so-called Chinese chips won’t succeed, the Wall Street Journal said.

At the end of the article, there is even a crude and absurd introduction of geopolitics, claiming that if self-reliance fails and the Biden administration continues to ban chips from the mainland, the Chinese military will be anxious about not being able to get 10-nanometres across and will consider sending troops to control Taiwan’s chip production.

This article is translated by Guancha.net for readers’ reference only; The views expressed in this article are not those of the website.

For the first time since 2005, Apple began making Macs without Intel chips. The company announced last week that the Mac would use Apple’s own M1 chip, made by Taiwan Semiconductor Manufacturing Corporation. Hey, Intel, this isn’t about you — the whole industry now knows that you didn’t make a 10 nanometer chip, and you’re still way behind. The implications go well beyond the computer industry.

If Intel is a few years behind, China may be nearly a decade behind. In drawing up the country’s 14th five-year plan, Beijing issued an official communique (I love that word! “, warning that China will fight a “protracted war” with the United States, and that “self-reliance in science and technology will provide strategic support for national development.” Even Taiwan, from which Apple gets its chips, is included in China’s deployment. We also saw this headline in The Asia Times at the time: “If China ‘occupies’ Taiwan, US tech giants will be in danger.” What do you think? Let’s dig a little deeper.

First, note that China made only 16 per cent of its semiconductors last year. In 2014, China announced a national Program to promote the development of the Integrated Circuit Industry, promising to spend $150 billion to develop local semiconductor manufacturing. But it doesn’t work, because you can’t throw money at everything. Many companies around the world (AT&T, GENERAL Motors) and countries (France, Italy, Russia) have tried to make semiconductors, but they have all failed. To produce semiconductors requires advanced equipment and proprietary technology.

Second, to make extremely fast chips for smartphones, 5G products and the most advanced sophisticated weapons, you need to have production facilities or microchip factories that can produce chips that are 7 nanometers or even 5 nanometers, which is not easy. According to Mike Brown, director of the Pentagon’s department of Defence Innovation, “50 per cent of high-end semiconductors are made in Taiwan”, with the rest made in America, South Korea and Israel.

Third, the Trump administration has cut off huawei’s access to high-end chips, making it no longer able to buy advanced chips made by TSMC. In addition to chips made by Intel and Samsung, CHIPS made by TSMC are used by most companies around the world, including American companies Nvidia and AMD.

Fourth, Intel’s technology has been stuck making 14-nanometer chips for about five years. This puzzled me: I had spent most of my early career tracking the chip industry, but I still had a hard time figuring out how the chip industry worked. For Intel’s 14nm chips, TSMC calls them 10nm chips. To make a 10-nanometre sub-chip, you need to use Extreme ultraviolet lithography (EUV), which etches tiny lines onto the chip. Intel says it will not start producing 10-nanometer chips (the equivalent of TSMC’s seven-nanometer chips) until the end of 2021. Intel may even buy chips from TSMC!

Fifth, China has many state-owned semiconductor companies, such as SMIC, but none has caught up with Taiwan Semiconductor Manufacturing (TSMC) because of the influence of ASML, another company to consider. Asmeier, a Dutch equipment manufacturer, is the only company in the world that makes EUV lithography machines. Here’s the message from Asmeier: “EUV lithography uses light with a wavelength of just 13.5 nanometers (close to X-ray level), which is nearly 14 times shorter than DUV (deep ULTRAVIOLET) lithography, another lithography solution that makes advanced chips, using 193 nanometers.” Well, asmal are not allowed to sell their products to China for defence reasons. So now China can’t produce sub-10 nanometre chips. Of course, China could invent its own EUV technology, but that could take a decade.

Finally, geopolitical involvement has created many variables. If China’s programme of self-reliance fails, and the Biden administration continues to ban the sale of advanced chips to China (which it should continue to do), the mainland will be in trouble, just as the 1941 US oil embargo forced Japan to step in. In the midst of an arms race with the United States, China’s military will be anxious about not being able to get its hands on 10-nanometre sub-chips. China is likely to weigh the pros and cons of controlling Taiwan’s chip production capacity, while the US is also weighing whether to “defend” Taiwan: TSMC has five microchip factories in a single park in Hsinchu.

But even this bold step is likely to be an immediate stumble. Making chips is not like working on an assembly line or in an oil refinery. The manufacturing formula may be written down, but in reality it exists only in the minds of TSMC engineers and is adjusted almost daily. A Silicon Valley engineer once accidentally poured ink into the water supply of a microchip factory, only to see production increase. Even if China “captures” Taiwan by force and sends engineers to the mainland, Taiwan’s chip production will fall. Chip production is more of an art than a science.

There is also a plausible risk that a few well-placed Chinese missiles could destroy half of the world’s advanced chip production capacity, and thus the global economy. The resulting shockwave could be even more damaging to China’s economy than the epidemic. But even so, I would like to see TSMC’s plants protected by Patriot missiles. I also hope to put some Patriot missiles at the Dutch factory in Asmire.

It may be years before Intel catches up. The same may be true of China. It is wise not to make advanced chips in one place. The Trump administration has forced TSMC to agree to build a plant in Arizona that will invest $12bn between now and 2029. This is just the beginning.


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