Friday, June 9, 2023

Knows that without its market the western chip industry will suffer

It is not easy to break an economic power like China. The sanctions imposed by the US-led Western coalition are aimed at preventing this Asian country of continental proportions from being able to manufacture cutting-edge semiconductors. And the most effective primary strategy for achieving this is to prevent being able to obtain the most sophisticated lithography equipment produced by Dutch ASML and Japanese Tokyo Electron, other companies.

In recent months, the Joe Biden administration has stepped up pressure on the Netherlands, Japan and South Korea to close ranks around the United States and block the arrival of their most advanced lithography machines in China. This device cannot be obtained in parallel markets, not only because of its high cost and large dimensions; Also because its implementation requires a joint effort by the manufacturer of the lithography machine and the company that uses it to make chips.

However, the tensions shaping the behavior of the semiconductor industry today don’t just spread in one direction. The governments of the United States, the Netherlands, Japan and South Korea are under pressure from their own companies. For them, losing a client with economic potential like China is not an option, so their demands on their respective governments have forced them to limit the scope of sanctions to strictly necessary limits.

Despite sanctions, China’s chip industry continues to grow

At the end of last March, Peter Wennink, the general director of ASML, traveled to China with one purpose: to massage the Xi Jinping government to ease the tension that sanctions have spread between his company and the latter. The Netherlands government has banned ASML from selling its extreme ultraviolet (UVE) and deep ultraviolet (UVP) lithography equipment to China. These are their most sophisticated photolithography machines, but they are by no means the only ones made by this Dutch company.

30% of future orders delivered by ASML come from Chinese customers

ASML also produces lithographic equipment used for the manufacture of integrated circuits needed by the automotive industry and manufacturers of devices equipped with an Internet connection, such as mobile phones, tablets or personal computers. These machines don’t make it possible to produce state-of-the-art chips, such as the 3nm semiconductors that TSMC and Samsung are already manufacturing for ASML’s SVU teams.

However, they serve to fine-tune basic general-purpose processor, controller, and communications chips, among other semiconductors, which require a wide range of equipment. Wennink confirmed after his trip to China that 30% of ASML’s future orders would come from Chinese customers. The suit is exempt from the sanctions imposed by the US-led coalition because these customers want to buy mature lithography machines, not UVE and UVP equipment that, as we recalled a few lines above, ASML can’t sell to China. ,

What is surprising is that the Chinese semiconductor industry is growing at a good pace despite the aggressive economic conditions. In fact, ASML confirmed in November 2022 that 18% of the 38,000 million euros it sold at that time were linked to Chinese customers. In practice, this means that most of the lithography equipment to be delivered in the next two years will go to the semiconductor plants of Chinese companies, such as SMIC or Hua Hong Semiconductor.

Most of the lithography equipment to be delivered to ASML over the next two years will go to semiconductor plants of Chinese companies

ASML has a leading role in the semiconductor industry as it is the only company that manufactures UVE equipment, but it is by no means the only company that is heavily dependent on Chinese customers. Other firms, such as the American Lam Research, which also develops lithography equipment and technologies, would hardly face a prosperous future without China. Xi Jinping’s government knows that large foreign companies in the semiconductor industry are highly dependent on its companies, and this has put it in a position of strength that will certainly help it better circumvent Western sanctions.

World Nation News Desk
World Nation News Desk
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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