The United States has imposed new restrictions on chipmaking tools' exports to China

The United States has imposed new restrictions on chipmaking tools' exports to China ...

Most analysts anticipate China's leading tech firms to report their worst-ever quarterly results as a result of regulatory crackdowns and shutdown-related factory output issues. While this will make it harder for the country to weather the economic storm, the Chinese government's strategy for technological self-sufficiency has a more pressing obstacle it has yet to overcome.

Bloomberg reports that the US is tightening limits on chipsmaking equipment sold to Chinese foundries. This change comes as a result of incredible advancements made by Chinese companies in fields like NAND and DRAM manufacturing and advanced logic such as CPUs and GPUs.

Yangtze Memory Technologies Co (YMTC) is already mass-producing 128-layer 3D NAND that matches Samsung, SK Hynix, and Micron's specifications. Apple is considering using YMTC NAND for its base model iPhone 14.

China is leading the world in creating more chip factories, gradually reducing the amount of chips it needs to import every year in the first five months of 2022, making about $174 billion in investment. In response, the Chinese government is considering absolving tariffs on imports of materials and equipment for high-tech manufacturing until 2030, and local foundries are receiving substantial subsidies to expand capacity as quickly as possible.

China's 10-year cost of ownership for chip foundries is nearly 40 percent lower than in the United States. By 2025, analysts predict 12 new manufacturing facilities to be operational in the United States, while China could construct as many as 31. However, Chinese chipmakers are having difficulties securing the required lithography equipment for advanced process nodes, so they're mostly buying old second-hand machines from Japan.

China's acquisition difficulties arise from the US urging ASML, which produces 95 percent of all DUV and EUV lithography equipment, to stop selling it to Chinese chipmakers. Suppliers like Lam Research, Applied Materials, and KLA Corp. are now required to follow the same procedure, meaning that Chinese companies will only use 14nm and older process technologies.

The new restrictions will affect all Chinese firms, including Samsung, SK Hynix, UMC, and TSMC, according to reports. Intel's intention for a wafer manufacturing facility in Chengdu, China, has been canceled by White House officials.

The US Senate passed the $52 billion CHIPS Act last week, aimed at boosting semiconductor manufacturing in the United States. Several corporations such as Intel, TSMC, Samsung, and Micron are all interested in making use of the money. It's unsurprising that companies already operating in China and other harsh countries will have difficulties in accessing the funds.

Despite growing restrictions, China appears determined to maintain stability at all costs. Taiwan has repeatedly poached engineering talent, creating another obstacle in the region. Not only that, but China's SMIC has apparently discovered how to make 7nm chips, likely by closely copying TSMC's first generation 7nm process technology.

SIA, Omdia, and WSTS data

According to the folks over at Tech Insights, these 7nm chips were discovered inside a Bitcoin miner. However, China is willing to spend as much as 10 trillion yuan ($1.47 trillion) to achieve technological self-sufficiency, and it is already increasing its worldwide market share of semiconductor sales.

China's global market share has surpassed Taiwan's and is somewhat behind Japan's. Assuming the same growth rate as in the previous two years, it might reach as high as 17 percent by 2024.

LAM Research is crediting Masthead.

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