TAIWAN AND DUTCH WILL REGRET HOLDING CHIP WORLD HOSTAGE
Without Taiwan’s near-term monopoly on Chip Fab, Taiwan would have no global significance at all. The US knows it. China knows it and Taiwan Semiconductor knows it.
The problem is very simple. Both the USA and China as well as Japan are entirely dependent on Taiwan Semiconductor Manufacturing Company for foundry chip services. This also includes Apple.
If Taiwan Semiconductor Manufacturing were to have a significant fire or earthquake situation, the world would be driven to the brink with massive semiconductor chip shortages regardless of political ideology. Apple would be paralyzed.
In the past, this was not a significant problem until Trump came along. First with Tariffs, then blocking US, European, and Japanese technology. Then it became a problem for both the USA and China.
Up until Trump started meddling, global semiconductor designers did not have any problems with Taiwan Semiconductor’s dominance over chip Fab.
It was a division of labour that did not compete with the chip designers. It worked well.
While Samsung has the same chip Fab capability in Korea, no chip designers want to work with Samsung which also designs its own chips. Taiwan Semiconductor limited its activities to foundry fabrication. The world was satisfied with this arrangement.
Trump changed all that by weaponizing the Taiwan Semiconductor Manufacturing Company and banning it from fabbing Huawei Kirin chipsets used in Huawei smartphones. A plethora of articles in the US financial media declared Huawei DOA. But its demise was grossly exaggerated. Huawei lives!
Trump’s too clever ploy triggered Huawei to stockpile chips until they could find other Fab solutions. It also triggered China to stockpile chips. China is the largest buyer of semiconductor chips in the world.
Coupled with bad planning and reduced ordering by US firms due to the Trump recession, this set up a perfect storm. The US has major chip shortages in areas of low ended fabrication which only the US can’t manufacturer. It was a perfect Trump Backfire again. His incompetence was stunning.
The US and China now find themselves in a situation where they want to reduce their dangerous dependence on Taiwan Semiconductor Manufacturing Company. Apple is uncomfortable as well.
THE US SOLUTION IS TO BUILD FAB PLANTS IN THE USA. THE CHINA SOLUTION IS TO EXPAND FAB PLANT CAPABILITY IN CHINA.
The USA… starts from scratch.
Intel left the Fab Business in 2018 after a huge failure in its 10nm fab. But they are back three years later with a plan to build two Fab Plants in Arizona. But Intel has a Samsung Problem.
What independent chip designer in the US or globally is going to contract either Samsung in Korea or Intel in the USA for foundry services? Both Intel and Samsung design their own chips. No designer wants to share their proprietary designs with a competitor. Samsung has a go it alone approach but is still subject to US Sanctions. Their self-sufficiency does them little good.
Taiwan Semiconductor wants to build a plant in Arizona too. Undoubtedly under the influence of Apple. This however sets up Taiwan Semiconductor as an adversarial party to China and a false competitor to Intel and other possible US Fab makers. One of Taiwan’s plans is to backdoor Fab to the USA that is actually made in Taiwan. China may Tariff US Chips.
China is Taiwan Semiconductor’s largest customer. Once China has full fab self-sufficiency, they will flatline Taiwan Semiconductor earnings or dominate TSMC’s fab lines.
The US faces OSHA and the EPA. Arizona better have plenty of water for these Fab plants.
To build a semiconductor FAB plant in the US will take twice as long and cost five times that of building in China due to regulations. This impacts the cost of production and makes US Fab more expensive. It is likely to take four years before any US Fab plant can begin any kind of production.
Meanwhile, China has been working on in-house fab for the last two years.
SMIC for example, hired Chiang Shang-yi, Taiwan Semiconductor Manufacturing Corp.’s former co-chief operating officer. SMIC has recruited other TSMC key personnel. These include Dr. Haijun Zhao and Dr. Liang Mong Song as SMIC Co-CEO and Executive Director.
UNLIKE THE US APPROACH, China is a master of strategy and they have 5G.
The Chinese assume the US will continue to block various substrates and materials and necessary ASML Dutch Lithography DUV and EUV machines. But that is all the US has at this point. Pressure is mounting to reject the US meddling in European economic and trade affairs. Why would the Europeans want to assist the US in buying more time only to take business away from European Companies and harm their largest customer, China?
China already has full capability in the 200 to 300nm wafers scale. These are used in automotive and large items where narrow gates are of no importance. China can bang these out like popcorn. These kinds of chips serve the automotive industry.
As for Dutch Lithography. China has had a lithography breakthrough over a year ago and has rapidly advanced new technology.
Shanghai Microelectronic Equipment Lithography, SMEE, equipment is expected to be fabricating 48nm and 28nm chips for IoT devices this year. Those are China’s magic numbers. That is the point at which chips diverge into typical gate use and narrow gate uses. With this technology coming on board later this year, or next China will cover 90% of its chip self-sufficiency.
Money talks and speaks Dutch. SMIC now has a contract with ASML for over $1 billion of ASML DUV machines this year for DUV machines which they extended to the end of 2021.
ASML is still succumbing to US pressure over EUV machines that would enable SMIC to move to 7nm and smaller scale, matching the capability of TSMC. ASML is losing sales in the process and likely to be caught from behind.
Peter Wennink, head of ASML opposes the US blocking European Technology
“If you shut out the Chinese with export control measures, you’ll force them to strive toward tech sovereignty, in their case real tech sovereignty! In 15 years’ time they’ll be able to do it all by themselves and the market for European suppliers will be gone,”
The EU commission and leading EU companies such as Infineon, oppose US meddling in their affairs. Infineon is expanding its plant in China. China is forecast to account for at least 40% of the global expansion in chip manufacturing by 2030. The US meddling has created a new and determined global competitor in Shanghai Microelectronic Equipment Lithography, SMEE, and blocking a Billion dollar ASML contract.
Be aware there is not a single instance where the US has blocked technology from China, that China has not gained self-sufficiency with their own technology. What is wearing low is that the US drags other countries into this unprofitable backbiting venture and it has harmed those nation’s economies.
As these countries and their businesses eye the growing Chinese technology and markets, they are rue to continue being bullied by the USA.
ASML and TAIWAN are in a predicament.
With the US literally forcing China to develop lithography and narrow gated self-sufficiency, Taiwan and ASML will see there markets collapse eventually. When that happens there will be a lot of fist shaking at the US for blocking EUV lithography sales to Mainland China. Under Liang Mengsong, SMIC completed the development of 28nm to 7nm chips in only 3 years. Western expectations were it was going to take ten years.
Though SMIC’s technical research and development strength is strong. At present narrow gated chips at 5nm will need EUV lithography machines from ASML. ASML is now the monkey in the middle. Flying high as a monopoly in the EUV arena, the US Control over ASML sales ultimately makes it a target for Chinese technology. Peter Wennink, head of ASML, says there is no question that China will eventually develop “Chip Sovereignty” and will no longer be reliant on European technology.
SMIC will ride this out. ASML needs China EUV sales to fund future production and R&D. ASML is running out of time.
SMIC has already mastered the 14nm chip scale so that is 90% of Chinese chip demand and China is the largest buyer of chips. That will pump up revenues and fund more R&D. SMIC has also found ways with packaging to improve chips performance. Thus the only area of deficiency will be in the 7 and 5nm scale. Though those chips are mostly for the high ended smart phones. Regardless 14nm scale and packaging can provide competitive punch especially since 5G network capacity can handle the computational heavy lifting making Smartphones essentially into dumb terminal.
CHINA is YEARS AHEAD of the US and Europe in 5G.
China has been testing 6G for over a year. 5G in China, will enable over 11 billion enterprise IoT devices by 2024, according to GlobalData. According to Deloitte and Touche, the US lacks the antenna density for 5G by 40x. Just to catch up on antennas would cost the US $400 Billion. Worse there are no US standards for deployment and no interoperability with supercomputers to provide massive network capacity in 3D.
5G network capacity will be needed to design the AI and 3D matrix systems of the future. These would include delivery drones and driverless cars and trucks which Unions in the USA Oppose. It is estimated that the US easily lags by four or even five years which is probably insurmountable. Trump’s antics opposing Huawei has pushed the US deep into the dark ages of political axe throwing. The USA claim that Huawei chips had hidden backdoors sending data to Beijing have proven to be utter nonsense. Nevertheless the US is in pursuit of its paranoid fantasy cutting their own throats from 5G.
China is concentrating on 28nm and 14nm scales which represent the low and higher range respectively
28nm chips satisfy the future demand for chips used in Artificial Intelligence and autonomous connected devices. Such as cars, smart traffic lights, delivery drones, robotics and biomedical devices. SMIC is ramping up for 28nm production to meet these needs. ASML recently delivered 11 DUV lithography devices to Mainland Chinese Companies. This deal accounted for 16% of ASML revenues.
More rigorous requirements will be met with 14nm.
14nm stands a hair breathe from 7nm technology in terms of performance compared to 28nm while involving much lower design and fabrication costs than 7nm. Remember what Intel did last year.
Intel’s 14nm Skylake desktop processors functioned as well as AMD’s 7nm Ryzen processor and cost less to make. China has 14nm Fab technology now. The Kirin 710a comes to mind. Kirin 710a at 14nm was fabricated at SMIC Shanghai. Another unanticipated surprise shocker for Trump and Biden. The TSMC 7nm Kirin 710 outperforms the 710a by just 1%! Huawei Lives!
CHINA FIGHTS BACK WITH ITS OWN ANTI-SANCTION LAW
While the US and its affiliate trade blockers have groused about the new law. It is not a new law at all. China has criticized Western nations for interfering in China’s internal affairs, but the “blocking rule” is based on the EU’s own blocking statute, which was passed in the 1990s to counteract new US sanctions on Iran, Cuba and Libya.
“The law signals that when you have no standing or power to boss people around, then your law in the U.S. will get you nowhere in China,” says Wei Jianguo, former commerce vice minister. “This law is like the ringing of a gong. It is a warning to the U.S.: You should be worried. China will not endure this treatment as easily as it once did.”
The law is intended to give third party countries and businesses, damaged by US direct sanctions to take their case to a Chinese Court and obtain damages. Additionally, any parties forwarding sanctions against China may have their VISAs revoked, assets seized, Chinese Transactions blocked. And there is no appeal.
JOE BIDEN CHIPS IN HAND; It’s sad. Four back to back low tech presidents calling the shots.
A day doesn’t go by that Joe Biden is not holding a silicon wafer or CMOS chip in his hand. He’s talking up a 52 Billion dollars US Government “Investment” in Semiconductors. Since the US is probably behind on the order of one trillion dollars, the $52 Billion looks like tip money at a burger joint that will likely end up in buybacks and higher CEO salaries. Joe’s conversation then drifts off mindlessly into Electric Vehicles and Batteries which have essentially nothing to do with semiconductor shortages. Here come more Obama Solyndras. Joe Biden’s vision of the future is the 1930’s.
Not only did Trump and Biden not understand the fundamental division of labor, they have pushed the United States into a situation of drastic dependence on Taiwan. Notwithstanding, the bombing of TSCM, or some other suspicions damage, natural events like fires or earthquakes, common in Taiwan, could plunge the USA into a chip shortage that would impact the US Military and DOD ability to produce war hardware. In a war strategy, TSCM and ASLM would be destroyed in minutes.
War is not going to happen of course. Instead the US will continue on its own suicide mission of trying to control the tech sales of global companies and China will continue its technology juggernaut. Within the next 12 months, China will be 90% chip self-sufficient and chipmakers around the world that are affiliated with US companies will see their markets shrink. Industry experts are expecting the U.S. share in the global semiconductor market to drop about 10% and revenue to decline more than 20% over the next three to five years. Another Trump destroyed US business sector.
The Dutch have a dutch Problem.
This is not going to sound polite but as the expression goes, you can always tell a Dutchman but you can’t tell them a Goddamn thing. As inexplicable as it is, the Dutch like being bullied by the USA. In World War II, Hitler attacked the Netherlands and FIVE DAYS LATER the Dutch surrendered. They have strange politics and see to have an interest in Neo-Nazism and white supremacy. Maybe they dug Hitler a little too much. The Dutch were about the only Europeans that like Trump. Even the Germans could not stand Trump thought Germany is the global whipping boy along with Japan. So they are accustomed to the US occupation since WWII.
But the Dutch fascination to surrender their autonomy to the USA is remarkable, especially a dummy like Trump. ASML has to have watched what has happened to Intel and Qualcomm over Trump’s dictatorship. They are losing market share. Asia is decoupling from US Sanctions. And the Dutch are support the Sanction mindlessly.
To do this the Dutch must believe that ASML will continue to enjoy a global monopoly indefinitely. There is not a single case history of a monopoly lasting indefinitely. Monopolies are hated by consumers. They may be tolerated short term but every customer of ASML wished there was some competition.
Nobody enjoys the prospect of ASML raising prices and gouging because they can get away with it short term. But it will not last and ASML CEO knows it. But the Dutch Government must think they serve the interests of the United States over Dutch self-interests. On top of that, the Dutch Economy is in recession. Like most of the EU, it is stagnant and for the next 5 years or so is predicted to grow at 1 to 1.5%.
They were pressured by low tech Trump as was Brussels to remove Huawei from Core G5 Networks. So what does this mean? It means the Dutch don’t have real 5G, they have the junk the USA is pushing, 5G lite which is 4G. Congratulations.
The whole point of 5G is not cell phone service as Trump and Biden seem to think. IT IS NETWORK capacity. So basically you have one smart company in The Netherlands which is ASML and an extremely low tech collection of politicians, some who actually prefer Hitler’s schtick to independence. Bottom line the Dutch economy is going no place and ASML will have about 5 years to go before China passes them.