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China may be making more advanced chips despite U.S. sanctions — but it still faces big problems


A Chinese flag next to a circuit board with semiconductor chips.

Florence Lo | Reuters

China’s largest chipmaker, SMIC, appears to have made advanced chips in recent months, defying U.S. sanctions intended to slow Beijing’s progress.

But there are still major challenges ahead in China’s bid to become more self-sufficient in the semiconductor industry, with questions revolving around the long-term viability of its latest advances.

What’s the last one?

SMIC is China’s largest contract semiconductor manufacturer. The nanometer number refers to the size of each individual transistor on a chip. The smaller the transistor, the more it is possible to group together a large number of them on a single semiconductor. Generally, reducing nanometer size can produce more powerful and efficient chips.

The 7-nanometer process is considered very advanced in the semiconductor world, although it is not the newest technology.

It was a big deal at the time. But last week, the Financial Times reported that SMIC was setting up new production lines to make 5-nanometer chips for Huawei. This would mark even greater progress for China’s largest chipmaker.

The tokens in Apples The latest high-end iPhones are made using a 3-nanometer process.

Why is this so important?

How does the minimum wage do this?

Without EUV tools, experts believed, SMIC would struggle to make chips 7 nanometers or smaller, or at least find it expensive.

So when the Huawei Mate 60 was released last year with a 7-nanometer chip, it raised many eyebrows.

An expert told CNBC at the time that SMIC was likely using older chipmaking tools to make more advanced chips.

The FT reported something similar last week. The newspaper, citing two people familiar with the plans, reported that SMIC plans to use its existing stock of semiconductor equipment made in the United States and the Netherlands to produce 5-nanometer chips, a move by compared to 7 nanometer chips.

“SMIC is now working very closely with the two domestic toolmakers, leveraging its existing base of advanced lithography equipment and relying on other outside expertise, such as that of Huawei, to constantly improve yields from advanced node processes,” said Paul Triolo, associate partner. at consulting firm Albright Stonebridge, told CNBC via email.

“So, for now, it is possible for SMIC to continue improving its capabilities and yields to 7 and soon to 5nm, for a small number of customers, mainly Huawei.”

China’s challenges

Using older equipment to make more advanced chips poses two major challenges.

The first is that it is more expensive to produce semiconductors than if more advanced tools and machines were used. The second is a yield issue: how many usable chips are produced and can be sold to customers. With older equipment, the efficiency is also lower.

The FT also reported, citing three people close to Chinese chip companies, that SMIC was expected to charge 40% to 50% more for products from its 5-nanometer and 7-nanometer production processes than TSMC for the same nodes.

TSMC, or Taiwan Semiconductor Manufacturing Company, is the world’s largest and most advanced contract chip manufacturer. TSMC makes semiconductors for companies ranging from Apple to Nvidia.

Pranay Kotasthane, chair of the high-tech geopolitics program at the Takshashila Institution, told CNBC that SMIC and China may continue to pour money into the process, but ultimately the costs will continue. to increase with each more advanced generation of chips – unless the company can get its hands on an ASML EUV machine.

“SMIC could overcome current performance problems by investing more money. This investment could even come from governments as it has become a matter of national prestige,” Kotasthane said by email.

“But the magnitude of higher costs will only increase with each subsequent generation of chips. Costs will continue to get worse unless China finds a major alternative to EUV.”



Note: The content and images used in this article is rewritten and sourced from www.cnbc.com

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