According to a report from Commercial Times, with expectations that tensions between the U.S. and China remain unresolved for the time being, and China’s continued production in mature process semiconductor foundries and communication equipment, the trend of decoupling from China is likely to expand.

The U.S.-China trade war has continued for several years, with the U.S. announcing in May an additional tariff on Chinese imports, including a substantial 50% tariff on semiconductor products manufactured in China by 2025. This move has further intensified the trade conflict between the two superpowers.

Thus, as per the same report, as concerns over overcapacity in various industrial products in China heighten this year, coupling with the unresolved U.S.-China relations, Taiwanese foundries including UMC, VIS, Powerchip, and networking companies such as WNC, SERCOM and Arcadyan may be benefited from the potential increased outsourcing orders.

Consequently, despite aggressive pricing competition from Chinese mature process foundries, the average selling price (ASP) and overall operational performance of Taiwan’s major mature process foundries have exceeded expectations in the first half of this year.

TrendForce previously indicated that, the supply chain’s order-shifting has become more proactive with the imposition of US tariffs. Qualcomm, which began cooperation discussions with Vanguard in 2021, has made its production plans more aggressive this year. This has prompted Vanguard to expand the first-phase capacity of its new Fab5 plant by 3Q24 and to complete cross-plant validation for Qualcomm’s PMIC to meet demand. Since 2022, MPS has also started shifting orders, including plans with both Vanguard and PSMC.

In recent years, the limitations on Chinese companies’ expansion in the U.S. have also allowed Taiwanese networking companies to capture significant American infrastructure opportunities. WNC covers optical fiber, 5G FWA, and enterprise networking businesses, with over 60% of its revenue from the Americas. SERCOMM Corporation has penetrated the North American optical fiber broadband upgrade market, securing key North American telecom operators. Meanwhile, Arcadyan Technologys’ optical fiber products have entered top-tier North American telecom operators.

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• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls
• [News] China Lists Semiconductor Self-Reliance Challenges, Excluding Lithography Equipment

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To overcome the restrictions from the US and its allies, China is said to be heavily investing in semiconductor development. According to a report from Liberty Times Net, Huawei has completed its “Lianqiu Lake R&D Center” with a total investment exceeding CNY 10 billion (approximately USD 1.4 billion).

EE Times China further reported that Huawei’s “Lianqiu Lake R&D Center,” covering an area of 2,400 acres and a total construction area of 2.06 million square meters, has finally unveiled its mysterious veil after three years of construction.

This research center is designed with 40,000 offices and is expected to gradually attract about 35,000 Huawei R&D talents. It is divided into eight zones, with fully connected internal roads, a miniature train system, and elevated bridges. The park’s transportation includes a miniature train system with a total of eight stations. Once fully completed, Huawei plans to relocate its existing Shanghai R&D base in Jinqiao and other scattered office spaces to the ” Lianqiu Lake R&D Center.”

According to the reported plan, the R&D Center will consolidate Huawei’s research efforts in HiSilicon, wireless technology, flagship smartphone development, smart driving/automotive components, digital energy, and other areas. This move aims to provide advantageous support for Huawei’s expanding businesses such as 5G/6G, digital energy, and smart automotive solutions.

Regarding Huawei’s substantial investment in building this research center, tech media outlet “Tom’s Hardware” highlighted on July 14th that amid the US-China semiconductor rivalry and various US sanctions against Huawei, the company must bolster its research and development efforts. Consolidating multiple research centers allows Huawei to streamline operations and facilitate easier collaboration among different departments.

The report states that this flagship project showcases Huawei’s investment commitment in future technologies. The “Lianqiu Lake R&D Center” is larger in scale than the combined size of Apple Park and Microsoft’s Redmond Campus headquarters in Seattle.

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• [News] Huawei and XMC Collaborate to Develop HBM, Looking to Break Through U.S. Sanctions
• [News] Huawei Faces Production Challenges with 20% Yield Rate for AI Chip

(Photo credit: Huawei)

According to an official release of Japanese semiconductor supplier Resonac, the “US-JOINT” alliance, comprising major semiconductor manufacturing companies from Japan and the United States, has been established to focus on next-generation semiconductor packaging. From Japan, six companies are participating, led by Resonac, MEC, Urvac, Namix, TOK, and Towa. The US participants include Azimuth, KLA, Kulicke & Soffa, and Moses Lake Industries.

In this alliance, Japanese companies primarily represent the materials sector, while the US companies include not only a materials company (Moses Lake) but also a packaging equipment company (Kulicke & Soffa), a measurement and inspection company (KLA), and a packaging services company (Azimuth).

Reportedly, US-JOINT will jointly establish a research center in the United States and plans to set up a base in California in the second half of this year. The construction of cleanrooms and the installation of equipment will begin, with the goal of starting operations next year.

As per industry sources cited by the China Flash Market, it is believed that the formation of this alliance primarily targets the US semiconductor market. The US is home to many world-class technology companies, such as NVIDIA, Qualcomm, and AMD, which are key customers in the high-tech packaging market.

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• [News] TSMC Reportedly Secures Another AI Opportunity, Winning Order from SK Hynix
• [News] Booming Sales of Japanese Semiconductor Equipment Continue to Break Records, Reportedly Surpassing JPY 300 Billion

(Photo credit: Resonac)

The China Association for Science and Technology (CAST) recently listed challenges facing China’s semiconductor industry. However, the list did not include lithography. According to a report from TechNews, it’s believed that the move to exclude lithography is more of a political consideration aimed at downplaying the impact of US sanctions on China’s local chip manufacturing industry rather than fostering innovation in lithography equipment within China.

Reportedly, Chinese leader Xi Jinping once told the Dutch Prime Minister that China does not need the help from ASML, the world’s leading advanced lithography system manufacturer, to drive its technological development. Currently, Shanghai Micro Electronics (SMEE) and Naura Technology Group in China aim to develop exposure equipment for the first time by April 2024.

However, regarding in the overall semiconductor manufacturing process in China, the production rate of Chinese chip manufacturing equipment is only 20%, with a global market share of less than 1%. In contrast, ASML holds a global market share of 93%.

EUV (Extreme Ultraviolet) lithography equipment is crucial for manufacturing next-generation chips. Even if Chinese companies had obtained these devices before US sanctions, they still require ongoing maintenance and support. The US ban has cut off this supply line, meaning the currently used exposure equipment will eventually cease to operate.

Unless China makes significant breakthroughs in the semiconductor lithography equipment industry, it will face many obstacles in advanced processes. Some industry leaders have already urged their companies to focus on traditional chips and 3D packaging rather than attempting to continue with advanced processes.

Currently, many companies are still striving to circumvent Washington’s sanctions. For instance, Huawei is establishing a major research and development center for exposure and wafer fabrication equipment. Yet, per an earlier report from Reuters, Peter Wennink, former CEO of ASML, stated in an interview that the chip war between China and the US will not be resolved anytime soon and could potentially persist for decades.

Other Chinese companies are also exploring open standard technologies like RISC-V. However, given the current situation, it could take China several years, if not decades, of research and development to catch up with mainstream exposure equipment manufacturers.

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• [News] ASML Former CEO Predicts Chip War Between China and the US May Persist for Decades
• [News] US to Lobby Netherlands and Japan to Contain China’s Chip Development, Focusing on HBM

(Photo credit: ASML)

Peter Wennink, former CEO of ASML, recently stated in an interview with Dutch broadcaster BNR that the chip war between China and the US lacks factual basis and is entirely driven by ideology. According to reports from Reuters and the Commercial Times, Wennink also anticipated that this chip war will not be resolved anytime soon and could potentially persist for decades.

The global EUV lithography supplier ASML stands out as the world’s largest and most advanced EUV company, as both TSMC and Samsung utilize EUV equipment for manufacturing, covering TSMC’s 7nm, 5nm, and 3nm processes and Samsung’s EUV Line (7nm, 5nm, and 4nm), along with the 3nm GAA process.

Wennink further emphasized that ASML has been operating in China for over 30 years, serving numerous customers and employing a large workforce locally. Therefore, the company feels obligated to protect the rights and interests of its customers and employees.

He acknowledged striving to maintain a balance between the US and China during his tenure, advocating on one hand for the US government to relax export restrictions and on the other hand raising concerns with Chinese officials about intellectual property infringements.

According to the reports, Wennink brought up the concerns from the U.S. authority about which party he sided with. Wennink noted that officials in Washington might sometimes think he’s friend of China. However, he is a friend to ASML’s customers, suppliers,  employees and shareholders. He then forecasted that given geopolitical interests are at stake, the chip war could take decades to play out.

Before retiring in April this year, Peter Wennink led ASML for a decade, transforming it into Europe’s largest semiconductor equipment manufacturer. During his tenure, China’s semiconductor influence rapidly grew, becoming ASML’s second-largest customer outside of Taiwan.

Since imposing export restrictions on China in 2018, the US has gradually expanded the list of controlled product categories, thus impacting ASML. In April this year, the US announced the latest round of export restrictions, limiting ASML’s ability to service high-end products already shipped to China.

At the time, Wennink emphasized that these new restrictions would not significantly impact ASML’s financial performance from 2025 to 2030, as only a small portion of its Chinese customers would be affected

Besides Netherlands, a previous report from Reuters on June 19 also mentioned that Japan, home to several chip equipment manufacturers like Nikon and Tokyo Electron, imposed restrictions on the export of 23 types of machinery to China to align with U.S. government policies aimed at curbing China’s technological advancements.

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• [News] US to Lobby Netherlands and Japan to Contain China’s Chip Development, Focusing on HBM
• [News] Strengthening Controls on Semiconductor Equipment Exports to China, Japan Reportedly Tightens Export Control Measures Further

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