SEMI has forecast global sales of semiconductor manufacturing equipment will increase 6 percent this year to $63.2 billion and log a record high in 2021 of $70 billion.
Industry experts concur the new restrictions aim to hobble China’s IC technology advancement. Although the export controls specifically mention Huawei, the end-use provision could impact indigenous Chinese chip makers and foundries such as SMIC and TSMC, which conduct business with Huawei.
“Huawei is already on the U.S. entity list and this expands the limitations derived from being on the entity list,” said SEMI.
The export rules pertaining to IC equipment sales, Puhakka said, are complex. “There are three objectives to the new controls. The first is for the government to get more information on [equipment] customers and the OEMs’ sales processes. The next is to stop the Chinese military — which essentially is the Chinese government — from acquiring advanced equipment. The third to limit Huawei’s access to advanced semiconductors.”
For example, if TSMC processes a wafer that’s shipped to Huawei, then the export rules apply. If the wafer is shipped elsewhere for packaging, there are “work arounds” to the system. In June, there were rumors that TSMC would push out its 2020 capital expenditures. That hasn’t occurred, and TSMC has since announced plans to build a fab in Arizona.
Will restrictions work?
Conventional wisdom is China will have a hard time enhancing its chip technology minus U.S. equipment. Puhakka doesn’t think the task is impossible. “For most fab equipment, there are EU or Japanese suppliers. In process control, there are fewer vendors, where KLA-Tencor is the leader.”
IP is another skirmish in the technology cold war with the added complexity of licensing agreements. “There are so many sources of IP,” said Puhakka. “You have Arm and memory IP and there are IP libraries compiled by companies such as TSMC. Then there are your own work products. For this discussion, they are treating IP the same as [hardware] — it is defined as a key technology that may fall into the hands of an entity.”
Politically, there is widespread support for hindering China’s progress on ICs. China’s dominance in the solar panel and LCD display sectors have driven prices so low that many foreign competitors have opted out. Government-subsidized Chinese companies have “trashed” those markets, experts say.
“That’s something that needs to be considered if you view [investment] from the perspective that the money comes from China,” said Puhakka. “The only other way Chinese companies can get money is something like SMIC’s IPO.”
Made in America
The United States, of course, has its own vested interest in semiconductor production — it wants chip manufacturing to return to America. One of the biggest stakeholders is the U.S. Department of Defense (DoD), which wants first dibs on new technology backed by security protocols developed in the United States. On Capitol Hill, Congress is wooing IC makers with the CHIPS for America Act, which would provide funding and tax breaks to manufacturing companies.
Equipment makers have remained mum on this issue as well. “Most companies in the semiconductor production space are used to operating globally,” Puhakka explained. “They have Chinese customers, Korean customers, Japanese customers and EU customers, and they’re used to deriving about 80 percent of their revenue outside of the U.S. They are agnostic [about the U.S.] — they don’t care where demand is coming from. As long as the ducks are quacking they are generally not concerned where the end market resides.”
The IC industry in general doesn’t base its decisions on favoring the United States, he added. “It’s about their product portfolios and how they are going to expand their business.”
Policies don’t change overnight, he added, and the U.S. has been losing the battle of incentives. Although there may be trade advantages for TSMC, it’s also looking at South Korea, Taiwan and China so facilities are not concentrated in a single country.
“Corporations are not nationalistic — they decide where it makes most sense for them to invest,” Puhakka concluded. “It’s less about whether the government hands over money, it’s about what the right decision is for them.”
Industry experts concur the new restrictions aim to hobble China’s IC technology advancement. Although the export controls specifically mention Huawei, the end-use provision could impact indigenous Chinese chip makers and foundries such as SMIC and TSMC, which conduct business with Huawei.
“Huawei is already on the U.S. entity list and this expands the limitations derived from being on the entity list,” said SEMI.
The export rules pertaining to IC equipment sales, Puhakka said, are complex. “There are three objectives to the new controls. The first is for the government to get more information on [equipment] customers and the OEMs’ sales processes. The next is to stop the Chinese military — which essentially is the Chinese government — from acquiring advanced equipment. The third to limit Huawei’s access to advanced semiconductors.”
For example, if TSMC processes a wafer that’s shipped to Huawei, then the export rules apply. If the wafer is shipped elsewhere for packaging, there are “work arounds” to the system. In June, there were rumors that TSMC would push out its 2020 capital expenditures. That hasn’t occurred, and TSMC has since announced plans to build a fab in Arizona.
Will restrictions work?
Conventional wisdom is China will have a hard time enhancing its chip technology minus U.S. equipment. Puhakka doesn’t think the task is impossible. “For most fab equipment, there are EU or Japanese suppliers. In process control, there are fewer vendors, where KLA-Tencor is the leader.”
IP is another skirmish in the technology cold war with the added complexity of licensing agreements. “There are so many sources of IP,” said Puhakka. “You have Arm and memory IP and there are IP libraries compiled by companies such as TSMC. Then there are your own work products. For this discussion, they are treating IP the same as [hardware] — it is defined as a key technology that may fall into the hands of an entity.”
Politically, there is widespread support for hindering China’s progress on ICs. China’s dominance in the solar panel and LCD display sectors have driven prices so low that many foreign competitors have opted out. Government-subsidized Chinese companies have “trashed” those markets, experts say.
“That’s something that needs to be considered if you view [investment] from the perspective that the money comes from China,” said Puhakka. “The only other way Chinese companies can get money is something like SMIC’s IPO.”
Made in America
The United States, of course, has its own vested interest in semiconductor production — it wants chip manufacturing to return to America. One of the biggest stakeholders is the U.S. Department of Defense (DoD), which wants first dibs on new technology backed by security protocols developed in the United States. On Capitol Hill, Congress is wooing IC makers with the CHIPS for America Act, which would provide funding and tax breaks to manufacturing companies.
Equipment makers have remained mum on this issue as well. “Most companies in the semiconductor production space are used to operating globally,” Puhakka explained. “They have Chinese customers, Korean customers, Japanese customers and EU customers, and they’re used to deriving about 80 percent of their revenue outside of the U.S. They are agnostic [about the U.S.] — they don’t care where demand is coming from. As long as the ducks are quacking they are generally not concerned where the end market resides.”
The IC industry in general doesn’t base its decisions on favoring the United States, he added. “It’s about their product portfolios and how they are going to expand their business.”
Policies don’t change overnight, he added, and the U.S. has been losing the battle of incentives. Although there may be trade advantages for TSMC, it’s also looking at South Korea, Taiwan and China so facilities are not concentrated in a single country.
“Corporations are not nationalistic — they decide where it makes most sense for them to invest,” Puhakka concluded. “It’s less about whether the government hands over money, it’s about what the right decision is for them.”
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