what prevents China's electronics from developing rapidly
Recently, the China Association for Science and Technology (CAST) listed problems the country faces in the semiconductor industry. There are many, including a shortage of skilled workers, logistical difficulties and the pressure of trade sanctions. But the main problem is the lack of modern lithographers and the ability to produce them within the country.
The industry is growing, but there is one problem
If we talk about any problems of the industry, except for lithographers, then the PRC is more or less successfully solving them. Several years ago, the PRC government developed a program for the development of the electronics industry, allocating more than a trillion US dollars for these needs. The state project is called Made in China 2025. The funds are allocated gradually, support is directed to the largest specialized companies – for example, Alibaba Group, Huawei Technologies Co. Ltd, SenseTime Group Ltd.
All this is bearing fruit. China continues to increase the volume of integrated circuits produced — even under tough sanctions from the US. The results are known – for example, in March 2023, semiconductor production increased by 28.4% at once. In absolute terms, this is 36.2 billion different electronic components. In the first quarter of 2024, almost 100 billion chips were produced – this is 40% more than in the last quarter of 2023.
According to experts from TrendForce, China's share in global chip production will reach 39% by 2027. First of all, we are talking about the supply of so-called “mature” chips, that is, those produced using technologies from previous years. These are 28-nm and less modern technical processes.
Herein lies the main problem – China's lack of access to new lithographs needed to produce modern chips. It is not so easy to solve, but China is trying very hard.
Some details
China's domestic chip manufacturing tool production volume for the semiconductor industry is about 20%. Domestic lithography tools account for less than 1% (compared to ASML's 93% of the global market).
Chinese companies have already purchased a large number of lithographs. They manage to buy them now, despite the sanctions, but bulk purchases are still impossible. Agreements regarding the purchase of lithographs attract a lot of attention from regulators.
The problem here is not only that lithographs are not directly available. But also that suppliers of such systems cannot repair and service machines that were sold to China earlier. Also because of trade sanctions. If such a system fails, there is either no one to fix it, or the repair takes longer than necessary. Moreover, it is far from certain that the spare part needed for restoration will be at hand, because their supplies to China are also prohibited.
There is an exit
Chinese companies are looking for ways to produce their own lithographs, and some are doing quite well. For example, in late 2023, Shanghai Micro Electronics Equipment Group (SMEE) announced the creation of China's first lithographic scanner designed to produce chips using the 28-nm process technology.
SMEE is far from a no-name. It is quite large, but previously it only produced lithographic scanners of the SSA600 series. They were intended to work with the technological processes of past years – 90-nm, 110-nm and 280-nm. 28-nm technology cannot be called super-modern, but it is still relevant for many industries. The new scanner is called SSA/800-10W. Only raw materials and components from China are used for its production. There are no imports from abroad, so sanctions cannot affect the company's work.
Another company from China, SMIC, modified its DUV equipment, adding deposition and etching components. This allowed SMIC to bypass the stated technical limitations, and now it can produce 5-nm chips. However, the cost of the processors will be higher than that of TSMC. This is because the equipment does not allow for the production of chips with a low defect rate. The machines are not very high quality, so the “output” of usable chips is about a third of what TSMC offers. But it is better than nothing.
The same company, together with Huawei, patented the self-aligned quadruple patterning (SAQP) lithography technology for producing chips using a 3-nanometer topology. Of course, the path from the patent to the deployment of all the necessary infrastructure will be long. But if you remember that the partners are the two largest companies in China that produce their own chips, all this does not sound so fantastic. In addition, SAQP is a technology developed by the Chinese themselves, which means that sanctions will not affect all of this.
China is using several strategies to deploy modern chip production in the country:
purchase of lithographic machines from previous years that are not subject to sanctions;
modernization of such systems, their refinement for the production of more modern chips;
the use of lithographs that were imported into the country earlier;
development of software for chip design;
creation of our own lithographs, albeit working with outdated technologies.
Business and government in China understand that unless they can create reliable lithographs to produce modern chips, the country will fall hopelessly behind in the electronics race. Whether China will be able to overcome the difficulties will be clear in 2027, when government support for large companies ends.
