Tech battle: US-Japan-Netherlands alliance triggers debate over scale of its potential influence on China’s semiconductor trade

Industrial chip manufacturing utilizing 28-nm course of equipment began in 2011. 28-nm chips are used on a variety of functions, together with central processing items, graphics processors, high-speed networking chips, and built-in circuits that energy smartphones, tablets and different shopper electronics gadgets.

So-called ultraviolet lithography gear, which makes use of laser know-how to principally carve a pre-designed circuit onto a wafer, is on the centre of the joint export management pact, in accordance with a report authored by Jefferies analyst Edison Lee on Monday.

Dutch agency ASML Holding dominates this market, with a virtually 90 per cent share on the again of its extremely superior excessive ultraviolet (EUV) machines. “EUV is a should for 5-nm semiconductor know-how or beneath, and the Netherlands agreed to not promote EUVs to China since 2019,” Lee mentioned.

ASML confirmed in an announcement on Sunday that the scope of agreed export controls may transcend superior lithography know-how. Earlier than export controls come into impact, “it must be detailed out and carried out into laws which is able to take time”, the corporate mentioned.

Various lithography gear distributors are Japan’s Nikon Corp and Canon, which make less-advanced deep ultraviolet (DUV) programs. There are a number of variations of DUV, and probably the most superior one known as ArF Immersion DUV, which permits chip know-how processing nodes between 45-nm and 7-nm.

If ArF Immersion DUVs turn into 100 per cent restricted from being bought to China, mainland chip foundries corresponding to Semiconductor Manufacturing Worldwide Corp, Hua Hong Semiconductor, Shanghai Huali Microelectronics Corp and ChangXin Reminiscence Applied sciences “would have bother increasing capability in even mature nodes” like 28-nm, Jefferies’ Lee mentioned.

He indicated that if the ban applies solely to 14-nm or beneath chip-processing know-how, “it could be laborious to implement since monitoring what the machine is used for over time is difficult”.

Echoing that remark, Nicolas Gaudois, head of Asia-Pacific know-how analysis at UBS, mentioned: “It’s fairly laborious for the gear firms to indicate that the gear being shipped is definitely not [falling] within the scope of [restrictions].”

Hypothesis concerning the US-Japan-Netherlands pact displays intensifying uncertainty for China’s semiconductor ambitions, months after the Biden administration carried out updates that additional limit China’s capacity to acquire superior chips, develop and preserve supercomputers, and manufacture superior semiconductors.

“We imagine the dearth of official bulletins and particulars may imply that Japan and the Netherlands have agreed solely in precept, however not but to the small print,” Jefferies Lee mentioned. “The largest sticking level is probably going what sort of lithographic machine ought to be restricted.”

Additional restrictions on DUV gear may restrict China’s output in mature chip applied sciences, in accordance with Arisa Liu, a senior semiconductor analysis fellow on the Taiwan Institute of Financial Analysis.

Nonetheless, China’s imports of lithographic machines rose to about US$Four billion in 2022, up from US$1.three billion in 2017, in accordance with the Jefferies report. It mentioned import statistics present that China has more and more relied on Japanese distributors, with lithographic machine imports from them rising to 33 per cent in final 12 months from 27 per cent in 2017.