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Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
Donald Trump’s latest headline-grabbing action against China is aimed at denying the Asian power’s push toward self-sufficiency in the semiconductor industry of $ 400 billion. But its effectiveness is being questioned almost before the ink dries, according to a growing chorus of voices in Washington and interviews with Chinese tech executives.
The United States is blacklisted Semiconductor Manufacturing International Corp. along with more than 60 of its peers deemed it a threat to national security, depriving them of American supplies, from software to chemicals needed to make their products. The key provision of the action against China’s largest chipmaker is a restriction on the sale of equipment and other items used to make advanced chips, an area dominated by American suppliers.
But in a letter to Commerce Secretary Wilbur Ross on Tuesday, Senator Marco Rubio and Rep. Michael McCaul warned that the move was “completely ineffective” and did not stop Beijing’s push for next-generation semiconductors.
The pair echo the concerns of industry executives and government officials who argue that the White House should do more for hamstrings. SMIC, one of several companies central to Beijing’s ambitions to supplant American dominance in a plethora of spheres, including semiconductors. Possibly one of the most important industries in the world, the ability to manufacture semiconductors is crucial for everything from artificial intelligence and data centers to self-driving cars, smartphones, and advanced weapons systems.
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In his bid to stop China’s semiconductor ambitions, Trump is turning to some of the same tools deployed against Huawei Technologies Co. Those measures succeeded in stopping Huawei’s growth, but It couldn’t decisively undermine its leadership in 5G networks or kill its giant smartphone division. Like its larger compatriot, SMIC anticipated US action, stockpiling up to 18 months of chemicals and other raw materials to keep its machines running, people close to the company said. And it increased its capex budget twice this year to $ 6.7 billion before withdrawing it citing US regulatory uncertainty.
“We are deeply concerned that the rules under the Entity Listing for the International Semiconductor Manufacturing Company (SMIC) will be completely ineffective in addressing this growing threat to national security,” Rubio and McCaul wrote. “We are deeply concerned that the placement of SMIC on the entity list by the Bureau of Industry and Security was done for show.”
Read more: USA Blacklisted Over 60 Chinese Companies Including SMIC
Beijing has long worried that a concerted White House campaign to contain the nation’s tech dominance, which has already shaken the supply chain of everything from iPhones to laptops, will ruin its rapidly developing chip industry. . Washington had already targeted Huawei’s secrets. HiSilicon division, while SMIC was grappling with rules introduced earlier this year designed to cut off supply to China’s armed forces. In response, Beijing is It says it is preparing broad support for so-called third-generation semiconductors and giving the same kind of priority to the effort it puts into building its atomic capacity.
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White House officials did not immediately respond to a request for comment on whether the US measures were too strict.
A representative for SMIC, which has repeatedly denied the supply of the People’s Liberation Army, declined to comment beyond a statement this week warning of a “major adverse impact” on its plans.
Within the company, the engineers Fight to assess the consequences and find solutions to secure the equipment it needs, just as Huawei did two years earlier, another person familiar with the matter said. What is at stake is the administration’s focus on drawing a line on 10-nanometer technology, prohibiting the sale of equipment intended for use in more advanced processes. SMIC could possibly reuse 80% of the previous generation equipment to produce more advanced chips, but that tactic will not sustain production in the long run and much depends on how far President-elect Joe Biden decides to carry the rules, a close third person. to the situation, he said, asking not to be identified discussing sensitive issues.
“The company already has critical equipment and materials needed to continue production,” said Xiang Ligang, CEO of the Beijing-based Information Consumption Alliance. “In the past, China was not very sensitive to the technological bottlenecks that it has. But now, Beijing is fully aware of the potential harm and is determined to solve these problems. “
Chinese government-backed SMIC, a chip maker for global names of Qualcomm Inc. for Broadcom Inc. relies on American teams for its long-term technology roadmap. While its engineers may keep research and production short-term, the latest sanctions basically freeze their capabilities as the industry advances. If a Biden White House maxes it out, SMIC could crash with 7nm or higher tech, while foreign rivals like it Taiwan Semiconductor Manufacturing Co. dominates the market. Increased scrutiny can also discourage mistrustful customers from dealing with uncertainty.
Entity List
But while that rule seems hard and fast, it misses the point that much of the equipment needed for 10 nm or more is already in use for less advanced production, meaning that SMIC may already have the equipment it needs to keep your plants running for a while. . McCaul and Rubio argue that SMIC can reuse up to almost 95% of the available previous generation tools.
“Without question, SMIC deserves to be on the entity list, but the legal language of the tool’s rule undermines the intent of the designation,” said James Mulvenon, director of intelligence integration at SOS International and author of a book on forced technology transfers to China.
Read more: Huawei beats Trump by hoarding vital chips for China 5G
The debate highlights the difficulty for US policymakers in choosing such a globalized and technical industry for projecting geopolitical targets. That follows a series of attacks on some of China’s biggest names, with varying degrees of success: TikTok by ByteDance Ltd. and Tencent Holdings Ltd.’s WeChat has linked Executive Order bans in court, while the video surveillance giant Hangzhou Hikvision Digital Technology Co. has risen 37% this year despite joining Huawei on the list of entities.
Largest market
China is by far the largest market for semiconductors and is heavily dependent on imports. Equipment providers like Applied Materials Inc. and KLA Corp., with production facilities in Asia, could argue that machines manufactured there are not subject to US jurisdiction, although Trade officials have said that companies exporting parts manufactured outside the US. SMIC will continue to face restrictions based on the quantity of their technologies. American origin.
The legality of that apparent loophole remains unclear, particularly as US officials pressure allies to cut off Chinese customers.
Another concern is the fundamental complexity of the industry, which means Washington decision makers must rely on companies themselves to explain the complexities of their products. In part, that is why the process of applying for export licenses from the Commerce Department has been lengthy.
Entegris Inc. CEO Bertrand Loy, who is also chairman of the industry’s largest trade group, SEMI, said no one yet knows how the latest sanctions will play out. “It’s not entirely clear which products exactly he’s targeting,” he told Bloomberg News this week.
– With the assistance of Ian King, Peter Martin, Debby Wu, Yuan Gao and Jordan Fabian
