China discovers how to produce a chip without foreign technology

The production of computer chips became a bone of contention in the trade (and technology) dispute between China and the United States just over two years ago.

The origins of the conflict lie in a US Commerce Department resolution that, back in 2020, banned companies worldwide from selling processors to China whenever those chips deliver any technology created in the US.

In practice, the measure dramatically limited the chip supply chain for China, which imported about 96% of the processors shipped in locally manufactured devices that year. This is because even manufacturers in Taiwan, Korea or Germany at some point use components or patents created by private companies or research institutes based in the United States.

The move was a heavy blow to China’s technology industry, which, although it has made enormous progress in several areas, is still dependent on foreign technologies in the chip segment, especially for more sophisticated semiconductors, such as those with 7 and 14 nanometer architectures. .

The tightening of American restrictions forced, for example, ASML, a Dutch company that is a world leader in the production of machines capable of “printing” circuits on sensitive silicon wafers (a necessary item for the production of processors), to refuse multimillion-dollar contracts with China.

America’s goal with restrictions has been partially achieved: to delay China’s technological development. In fact, the rollout of 5G networks and the production of autonomous cars in the country was slowed last year by a shortage of chips.

A possible solution that the Asian country found was to produce chips on its own or with partners that do not use contracts with American companies.

This week, Canadian consultancy TechInsights published a report claiming that SMIC, China’s largest chipmaker, is already capable of producing its own components built on a 7-nanometer architecture. According to TechInsights, 7nm chips from SMIC were found on data processing boards used for cryptocurrency mining.

SMIC and Chinese authorities have neither confirmed — nor denied — the Canadian company’s report.

Shortly after TechInsights published the documents, without citing the US, Wei Shaojun, president of the National Semiconductor Association of China, published an article in the local press calling for greater public investment in the industry.

According to Shaojun, in the past 12 months, Chinese companies have invested “only” US$1 billion in research and development of new chips, an amount that Shaojun considers too low.

According to the representatives of the association, such investments are urgent, and since they do not allow a quick financial return, they do not sufficiently attract the interest of private agents. Hence the call for funding from Beijing.

In response to Shaojun, representatives of China’s agency equivalent to the Ministry of Science recalled that there is a publicly funded venture capital fund offering more than $40 billion to expand the country’s chip industry.

An example of the effectiveness of this fund would be the financing of US$7.5 billion guaranteed to SMIC for the construction of new chip production facilities on the outskirts of Tianjin, in the north of the country.

The importance of maintaining technological control over the entire chip production cycle can be expressed in the “Chips and Science Act”, a piece of legislation created by a rare consensus between Republicans and Democrats in the US Congress. Between direct access to public funding and tax incentives, the bill mobilizes $53 billion to help develop the nation’s chip industry.

Under the initiative of the Biden administration, companies from some foreign countries can also benefit from these incentives if they are involved in projects in partnership with American companies. So far, three countries have been authorized to sign cooperation agreements, all of them Asian: Japan, South Korea and Taiwan.

As it turned out, a chess move that makes it difficult for China to cooperate with its neighbors in the high-tech sector.

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