Due to sanctions China is stuck in a technological trap

Due to sanctions, China is stuck in a technological trap from which there is no way out with cash injections alone.

Although Chinese authorities are ready to help the country’s semiconductor industry deal with the fallout from US sanctions, money alone does not seem to be enough. Companies will have to make significant efforts to get out of the technological trap.

    Image Source: Applied Materials

Image Source: Applied Materials

It is known that the Chinese government intends to allocate US$140 billion, including subsidies for the purchase of equipment for the manufacture of locally produced chips. China’s only major manufacturer of semiconductor lithography equipment, the Shanghai Micro Electronics Equipment Group (SMEE), will benefit from this in particular. The decision was taken in response to the tightening exports of chip-making technology from the United States to China.

However, money alone will not be enough to compete with Western competitors. According to Reuters, they are “generations” ahead. SMEs and other local companies mainly sell their products to local chipmakers, and the lack of contact with industry giants like Taiwan’s TSMC and South Korea’s Samsung makes it difficult to solve emerging technical problems and advance. Even successful solutions do not go into mass production, moreover, manufacturers cannot learn anything new from market leaders who produce the most advanced products – usually the exchange of ideas and technologies is mutual.

According to sources from Chinese companies, the market entry threshold has recently become even higher – developments are becoming more complex, production chains more global and the market is dominated by Western companies such as the Dutch ASML.

According to Reuters, top managers at the SME, founded in 2022, had no prior experience with lithography, and the first machines were made by studying and copying purchased used patterns, as well as studying publicly available patents and documentation. As a result, the company managed to start production of machines that ensure the manufacture of chips using a 90nm process technology, but the technology lags behind ASML solutions by about 20 years. Since then, SMEE has had little to no success, due in large part to difficulties in sourcing tools from overseas. According to one of the sources of the publication, although today it was possible to build machines of the appropriate level, specialists literally do not know how to use and maintain them.

    Image Source: Applied Materials

Image Source: Applied Materials

Some representatives of the Chinese Academy of Sciences suggest abandoning the simple reproduction of foreign solutions and focusing on the creation of fundamentally new technologies and materials. According to the Academy, by collecting patents and managing use abroad, you can set your own bottlenecks and barriers in the global production chain and take countermeasures and, if necessary, eliminate existing pain points.

Meanwhile, Chinese semiconductor companies are taking another hit as US restrictions imposed in October prevented companies like Lam Research and Applied Materials from supplying China with equipment capable of making relatively advanced chips without special permits. The situation could worsen if the US forces companies from Japan and the Netherlands to join restrictions on the export of chip-making technology – all US companies are already following the sanctions.

According to a representative of the Chinese business, if earlier companies also received service when buying equipment, now due to the imposed sanctions they cannot achieve this.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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