The most geopolitically significant leg of Nancy Pelosi’s ongoing Asia tour began late that evening on August 2 when she touched down in Taipei, Taiwan. Pelosi is the speaker of the US House of Representatives.
Pelosi reportedly spoke to Mark Liu, chairman of TSMC, earlier today (August 3), about the Chips Act, which was just passed by the US Congress last week. The US is increasing pressure on China’s semiconductor industry in addition to its attempts to strengthen the semiconductor supply chain, which is mostly focused in Asia.
Suppliers of semiconductor machinery like KLA and Lam Research have both acknowledged the most recent US effort to keep China from acquiring the equipment required for 14nm process nodes. The Wassenaar Agreement previously prohibited ASML from supplying EUV lithography machines to China; the latest sanctions are anticipated to add to this restriction by forbidding ASML from exporting DUV equipment to China.
Despite earlier proof from Techinsights that SMIC has successfully manufactured at 7nm without EUV, China’s advancement into more sophisticated technology processes is unquestionably now significantly hindered. SMIC had previously stated that their FinFet 14nm technology had begun volume production in the fourth quarter of 2019 and that the 12nm process would follow in the early months of 2020. Even co-CEO of SMIC Liang Mong Song once said that EUV equipment wasn’t necessary to implement SMIC’s sub-7nm processes, the so-called “N 1” and “N 2” nodes.
However, a former SMIC executive raised doubts about the Chinese chip industry’s ability to increase capacity at more advanced nodes, such 28 nm. The former CEO said that if China was truly banned from acquiring new DUV equipment, it would be a setback in an interview with DIGITIMES Asia.
Nevertheless, he thinks the effects might just be temporary. The only Chinese businesses that can manufacture logic ICs at 28 nm, according to him, are SMIC and HLMC. However, they don’t have a complete support infrastructure, so their production volumes are still quite low. He added, “Process nodes below 28nm can satisfy the majority of Chinese chip demand, such as display drivers and power control ICs.
In order to achieve a size where it can effectively grab enough market share, China can choose to further grow and polish its mature process technologies, imitating the approach used by the country’s panel and PV industries, the former CEO claims.
The former CEO said, “It is not impossible to compete at more sophisticated process nodes again when significant volume and scale are obtained, paired with domestically built equipment. After all, the US should be accelerating its own development rather than using sanctions to impede competitors.
SMIC’s financial reports starting in the second quarter of 2020 no longer distinguish between the revenue contribution of its 14nm process and its 28nm node, instead grouping both together. Nevertheless, according to SMIC’s 2021 annual report, its FinFet/28nm process contributed for only 15.1% of its income, while its primary revenue streams at 55/65nm and 0.15/0.18 micron were respectively 29.2% and 28.7%.
One of the process nodes that was in the most demand at the height of the worldwide chip shortage crisis was 28 nm. For process nodes at 28 nm and higher, SMIC has implemented multiple capacity expansions since 2020. SMIC initially anticipated that its clients would switch to the 28nm production line as the pricing difference between 28nm and 40nm shrank prior to the new DUV tool sanctions. The consultancy International Business Strategies initially predicted that China will make up 40% of the world’s 28nm capacity by 2025, given the rate of capacity increase.
The 28nm capacity of TSMC, GlobalFoundries, and UMC has also been increased in various locations. In particular, as specialist processes are anticipated to migrate to 28nm, TrendForce estimates that the mature processes of 28nm and above will constitute 75–80% of worldwide fab capacity from 2021 to 2024.