Recent reports of breakthroughs in China’s chip manufacturing equipment have gained attention, with rumors suggesting that China’s domestically-made DUV equipment can produce chips at 8nm and below. Some companies have also applied for EUV equipment patents. However, according to a report by the Central News Agency, experts believe these claims are questionable, emphasizing that production yield is the real key.

China’s Ministry of Industry and Information Technology recently released a guidance catalog for promoting major technological equipment. Two lithography machines listed have been interpreted by some as a sign of significant technological progress, sparking claims that China can now produce 8nm and more advanced nodes.

Meanwhile, German media outlet Deutsche Welle reported that Shanghai Micro Electronics applied for a series of EUV-related patents, which may indicate the ability to manufacture chips at 7nm and below.

Huawei’s flagship Mate 60 Pro, launched last year, was reportedly equipped with SMIC’s self-made 7nm chips. Earlier this year, rumors suggested SMIC had successfully produced 5nm chips without EUV machines, which would be used in Huawei’s Mate 70 series set for release later this year. These claims have resurfaced in light of recent developments.

Talks of China breaking through U.S. tech barriers have caught the attention of both domestic and international markets, with many Chinese netizens celebrating on social media. However, while the public cheers, official responses have remained muted. Aside from the ministry’s guidance catalog, no Chinese authorities or companies have confirmed the breakthrough, nor have any real-world applications been showcased.

In reality, since the start of the U.S.-China tech war, China has often hinted at “breaking through technological blockades,” but the results have been largely inconclusive.

Take SMEE, for instance. In June 2020, it announced that it would deliver China’s first domestically-made 28nm immersion lithography machine between 2021 and 2022, model SSA/800-10W. However, the news soon faded. By May 2023, rumors resurfaced that the 28nm machine was nearing completion, and by December, Zhangjiang Group in Shanghai claimed via its official WeChat account that SMEE had successfully developed the 28nm lithography machine. The post was deleted shortly afterward.

As of now, the SSA/800-10W has yet to appear on SMEE’s official product list.

According to a report by Chinese semiconductor media IC SMART, the lithography machine specifications recently released by the Ministry of Industry and Information Technology show improvements over SMEE’s SSA600 model. However, they still fall short of the capability to produce 28nm chips, let alone 8nm or 7nm chips. The rumors likely stem from a misunderstanding of what the specifications actually mean.

Additionally, a Reuters report from September last year noted that the yield rate for SMIC’s 7nm process was below 50%, whereas the industry standard is 90% or higher. This would significantly constrain chip shipments and impact smartphone production.

(Photo credit: SMEE)

According to a report by the Central News Agency, China’s Ministry of Industry and Information Technology (MIIT) recently announced a major technological breakthrough: the development of a deep ultraviolet (DUV) lithography machine capable of producing chips at 8 nanometers and below. This technology is currently being promoted for broader application.

Despite initial market speculation that the ArF lithography machine might be suitable for 8nm processes, TrendForce’s latest market analysis suggests otherwise. The machine’s overlay accuracy of ≤ 8nm is inadequate for advanced processes, which require ≤ 3nm for 10nm processes and ≤ 2nm for 7nm processes. Additionally, for advanced processes, the resolution must be ≤ 38nm, while this machine’s resolution is ≤ 65nm, making it challenging to handle even 40nm processes.

On the 9th, the MIIT published a notice on its official website regarding the “Guiding Catalog for the Promotion and Application of Major Technical Equipment (2024 Edition),” urging local governments to enhance the coordination of national support policies across industries, finance, technology, and other sectors.

The MIIT emphasized that major technical equipment is a cornerstone of national strength and security. “China’s first (set of) major technical equipment” refers to equipment products that achieve significant technological breakthroughs domestically, hold intellectual property rights, but have not yet gained substantial market performance. This includes complete machinery, core systems, and key components.

The catalog indicates that, among the integrated circuit production equipment, one notable entry is the “ArF Lithography Machine” (DUV lithography machine). The core technical specifications are a “wafer diameter of 300mm, illumination wavelength of 248nm, resolution ≤65nm, and overlay accuracy ≤8nm.” This means that the domestically produced DUV machine is capable of manufacturing chips of 8 nanometers and below.

Reports suggest that the development of the domestic ArF lithography machine was primarily completed by several leading Chinese semiconductor equipment manufacturers and research institutions. Notably, Advanced Micro-Fabrication Equipment Inc. (AMEC) and Shanghai Micro Electronics Equipment (SMEE) were key participants. The Institute of Microelectronics of the Chinese Academy of Sciences also made significant contributions in this area.

On the 5th of this month, the United States announced tighter export controls on machines required to manufacture advanced semiconductor equipment. The Dutch government followed suit the next day, announcing expanded restrictions on semiconductor manufacturing equipment exports.

Reuters reported that ASML’s 1970i and 1980i DUV lithography machines, which are mid-range models in ASML’s DUV product line, will be impacted by these restrictions on exports to China.

According to a report by Central News Agency, if China successfully achieves domestic production of DUV lithography machines capable of 8-nanometer and below processes, most future chip manufacturing would no longer be dependent on ASML. However, as of now, there has been no official announcement from the Chinese government or manufacturers regarding this development.

Read more

• [Insights] China’s MIIT Unveils Latest Domestic DUV Equipment, Faces Challenges for 40nm Processes
• [News] Breakthrough in China’s Domestic DUV Equipment to 8nm? Experts Call It a Misunderstanding

(Photo credit: AMEC)

In late August, it is said that the Netherlands mulls to ban ASML, the country’s semiconductor equipment giant, from conducting equipment maintenance and providing related backup components in China. Now the latest regulation has been revealed, as the Dutch government announced last Friday the expansion of export restrictions on advanced semiconductor manufacturing equipment, which covers two of ASML’s DUV immersion lithography systems, according to a report by CNBC.

The new export control rule, which took effect on September 7^th, indicates that ASML will now have to apply for licenses with the Hague rather than the US authority for some of its machines, as the Dutch government regards these curbs as a critical measure for national security, and attempts to gradually take the initiative rather than following the U.S., a report by Bloomberg notes.

According to the official announcement made by ASML, the new rule will require its TWINSCAN NXT:1970i and 1980i DUV immersion lithography systems to obtain a license from the Dutch government before being exported. The Dutch export license requirement is already in place for ASML’s TWINSCAN NXT:2000i and subsequent DUV immersion systems.

Regarding ASML’s sales in lithography units in the second quarter of 2024, China emerged as the largest market, as it contributed 49% of the revenue, higher than South Korea’s 28% and Taiwan’s 11%.

Interesting enough, ASML refers to the updated license requirement as “a technical change,” and is not expected to have any impact on the company’s financial outlook for 2024 or for its longer-term scenarios.

The latest move from the Dutch government is less harsh than the rumors earlier, which indicated that the Netherlands might ban ASML from conducting equipment maintenance and providing related backup components in China. The measure, if implemented, would be a heavy blow to China’s semiconductor industry, especially on the development of advanced nodes.

In response, China has expressed “dissatisfaction” with the Dutch government’s decision to expand export controls on ASML chipmaking equipment, according to the statement by the Chinese commerce ministry on Sunday, cited by Reuters.

The ministry urged the Dutch government not to misuse export controls, to avoid actions that could harm Sino-Dutch cooperation in the semiconductor industry, and to protect the “shared interests of Chinese and Dutch enterprises,” according to Reuters.

Beijing has consistently been criticizing Washington’s approach of pressuring allies like the Netherlands and Japan to implement export controls aimed at limiting China’s access to advanced chips and chipmaking equipment.

Read more

• [News] ASML Claims the World Counts on China for Legacy Chips; So Do Chip Equipment Giants
• [News] ASML Might Not Be Able to Provide Advanced Chipmaking Maintenance Services to China as Early as 2025

(Photo credit: ASML)

According to an earlier report from Bloomberg, the Dutch government may restrict ASML’s after-sales services for Chinese customers. Regarding the matter, the Dutch Prime Minister Dick Schoof has stated that the government’s decisions will prioritize ASML’s actual interests to avoid jeopardizing its global position, according to a report by Reuters.

ASML derives about 20% of its total revenue from after-sales services. Per the same Reuters’ report, while Dick Schoof did not comment on rumors that Netherlands would put more curbs on ASML’s China chip business, he highlighted that negotiations are progressing smoothly.

Moreoever, the Dutch government is particularly focused on balancing ASML’s interests with other risks, as the authority has acknowledged that the economic interests are extremely crucial, he noted.

He reiterated that ASML represents an extremely important and innovative industry for the Netherlands and should not face any setbacks, as that would harm its global standing, according to Reuters.

ASML plays a crucial role in the global semiconductor supply chain, as the production of advanced chips heavily reliant on its lithography machines.

Per another Reuters report, in 2023, China became ASML’s second-largest market, accounting for 29% of its total revenue, following Taiwan. This surge in China’s market share was driven by a rush to purchase ASML’s DUV machines before stricter U.S. export restrictions took effect.

Due to U.S. government pressure, the export of the most advanced Extreme Ultraviolet (EUV) lithography machines to China has been banned.

Recently, ASML has expressed dissatisfaction with the Dutch government’s lack of support, with former CEO Peter Wennink even reportedly threatening to relocate the company’s headquarters if its development continues to be constrained.

Wennink has publicly opposed export restrictions to China, warning that such measures could stimulate China to develop new technologies and compete with ASML.

Read more

• [News] ASML Might Not Be Able to Provide Advanced Chipmaking Maintenance Services to China as Early as 2025
• [News] ASML Claims the World Counts on China for Legacy Chips; So Do Chip Equipment Giants

(Photo credit: ASML)

According to a report from the South China Morning Post, the U.S. export controls, which are restricting China’s access to advanced chips and technology, have intensified China’s efforts to replace global semiconductor manufacturing equipment. However, industry sources have indicated that China still faces significant bottlenecks in this area.

The report mentions that Chinese semiconductor equipment companies like NAURA and AMEC are leading efforts to encourage local foundries to adopt domestic equipment.

Notably, sources cited in the same report also reveal that there is an unwritten rule among Chinese semiconductor fabs that locally-made tools should account for 70% of their production lines.

Per a report by TrendForce, Chinese manufacturers have achieved a self-sufficiency rate of 15% or higher in materials for mature processes, such as silicon wafers, photomasks, photoresists, electronic gases, and wet chemicals. However, items with a self-sufficiency rate still below 15% include photolithography equipment, photomasks, and EDA.

AMEC’s chairman and CEO, Gerald Yin Zhiyao, stated that China is expected to achieve a basic level of self-sufficiency in chip production equipment by this summer, something that was unimaginable just a few years ago.

He acknowledged that while there are still gaps in quality and reliability, China’s semiconductor supply chain can indeed achieve self-sufficiency. This, he suggested, is further evidence that U.S. export controls may have accelerated the development of China’s chip industry.

However, the report also pointed out that China remains constrained in one critical area: lithography technology, which is subject to the most stringent export controls.

Dutch company ASML is the sole supplier of Extreme Ultraviolet (EUV) systems, essential for producing advanced chips, and is also the main supplier of Deep Ultraviolet (DUV) systems needed for mature process chips.

President of foundry China Resources Microelectronics, Li Hong, stated that in 2023, only 1.2% of the lithography systems used by Chinese foundries was purchased from local suppliers.

In the second quarter of this year, ASML’s shipments to Chinese customers totaled EUR 2.35 billion, accounting for nearly half of its global sales. This indicates that China continues to rely heavily on ASML’s equipment in the legacy nodes, which is not subject to U.S. sanctions.

Paul Triolo, senior vice-president for China and technology policy lead at the U.S. consulting firm Albright Stonebridge Group, noted that the significant purchases of DUV lithography systems from ASML by Chinese companies highlight that SMEE, a major Chinese lithography equipment manufacturer, still lags behind ASML in reliably producing lithography systems for 28nm and below processes.

However, lithography technology is not the only bottleneck China faces. Li Hong also noted that the local supply ratios for ion implantation and inspection and metrology systems is only 1.4% and 2.4%, respectively.

As per Chinese customs data, the value of ion implantation systems imported by China in 2023 increased by 20% year-on-year to USD 1.3 billion.

A research report by Guohai Securities indicates as well that Chinese fabs rely heavily on metrology systems from companies like KLA, Applied Materials, and Japan’s Hitachi.

KLA reportedly holds a 50% global market share in inspection and metrology equipment.

An industry source cited in the report mentioned that the local supply ratio in the inspection and metrology sector is relatively low, with local substitution primarily occurring in lower-end products.

Read more

• [News] China Lists Semiconductor Self-Reliance Challenges, Excluding Lithography Equipment
• [News] ASML Former CEO Predicts Chip War Between China and the US May Persist for Decades

(Photo credit: ASML)