China’s largest chip maker SMIC is ramping up manufacturing of a decade-old chip expertise, key to many industries’ provide chains, setting off alarm bells within the United States and prompting some lawmakers to attempt to cease them.
The United States and allied nations might additional step up restrictions if China proclaims a $144 billion help bundle for its chip business, as Reuters completely reported on Tuesday, stated TechInsights’ chip economist Dan Hutcheson.
Starting with the Trump administration, the United States has been tightening the noose round China’s high-tech ambitions. It reduce off the world’s largest telecommunications agency Huawei Technologies from the US market and applied sciences, in addition to reduce off air provide to China’s superior chip making by way of a collection of guidelines this yr.
But why fear about older chip expertise?
China, which in 2020 had 9 % of the worldwide chip market, has a observe report of dominating key applied sciences by flooding the market with cheaper merchandise and wiping out international competitors, say China watchers.
They did it with photo voltaic panels and 5G telecom gear, and will do it with older expertise chips, stated Matt Pottinger, former Deputy National Security Advisor of the United States throughout the Trump administration who has been learning chip coverage on the Hoover Institution.
“It would give Beijing coercive leverage over each nation and business — navy or civilian — that rely on 28-nanometer chips, and that is an enormous, huge chunk of the chip universe,” he said.
“28 nanometer” refers to a chip technology commercially used since 2011. It is still widely used in automotive, weapons and the explosive category of internet of things gadgets, said Hutcheson.
Hutcheson, who has been monitoring chip production capacity for four decades, said the concern is that Semiconductor Manufacturing International and other chipmakers in China could use government subsidies to sell chips at a low price. And a possible new round of financial support from Beijing would increase chip production even further.
“The Chinese could just flood the market with these technologies,” he said. “Normal companies can’t compete, because they can’t make money at those levels.”
US Lawmakers pushing against SMIC
Those concerns have pushed some lawmakers to use legislation for setting the defence budget hold back SMIC.
While the measure is weaker than what was initially proposed, this week US Senators are expected to pass the annual National Defense Authorization Act 2023 that includes a section barring the US government from using chips from SMIC and two other Chinese memory chip makers. It is not clear what impact the restriction, which kicks in five years after it becomes law, will have on SMIC.
Founded in 2000 with backing from Beijing, SMIC has long struggled to break into the ranks of the world’s leading chip manufacturers.
But it is a giant in older technology, including chips that regulate power flows in electronics. And its revenue was close to $2 billion in the third quarter this year, roughly double the same period last year on the back of the global chip shortage.
SMIC filing supply gasp
With U.S. export controls making it impossible to produce advanced chips, SMIC is doubling down on mature technology chips and has announced four new facilities, or fabs, since 2020. When those come online, it would more than triple the company’s output, estimates Samuel Wang, Gartner chip analyst. He said there is a huge ramp up in new chip fabs across China.
“All this will start to have an impact from early 2024 and will be full blown by 2027,” said Wang, adding the chip supply increase will put downward pressure on chip prices.
The importance of older chip technology hit the industry in the face in 2021 as a shortage of those chips prevented manufacturing of millions of cars and consumer electronics.
Mark Li, Bernstein Research’s chip analyst in Asia, said the company is becoming a formidable competitor to Taiwan’s UMC Microelectronics and US-headquartered GlobalFoundries.
“SMIC has been much more willing to add capacity than other fabs at the low-end, and especially in this shortage we’ve seen in the past two years,” he says. “It’s not an issue now…but who knows, maybe in a few years there will be another shortage and capacity will be a big problem.”
© Thomson Reuters 2022