Tear off the mask of free competition and curb China’s technological development. How many "devils" are hidden in the US "Chip Act"?
[Global Times reporter Yuan Jirong] In order to suppress and contain the rising China science and technology and safeguard American hegemony, Washington has increasingly turned to the core of the digital economy — — In the field of chips. On August 15th, the US Department of Commerce implemented export control on EDA software known as "the mother of chips". Previously, the United States had promulgated the Chip and Technology Act of 2022 (hereinafter referred to as the "Chip Act") on July 28th. The purpose of this bill is to cut off the supply of advanced technology, equipment and materials for chip manufacturing to China, accelerate the return of the chip industry to the United States through subsidies, cut off the contact between China’s chip industry and the world, and reshape the supply chain pattern of the global chip industry chain. Obviously, this is a wishful plan of the United States. So how many "devils" are hidden in the "Chip Act" of the United States? Our reporter conducted an interview and investigation.
In the five sub-chains, where do Chinese and American enterprises occupy?
The main contents of the "Chip Act" in the United States include three items: one is to provide 52.7 billion US dollars of financial support to the semiconductor industry; The second is to provide enterprises with a 25% investment tax credit of about $24 billion; The third is to allocate about 200 billion US dollars to support cutting-edge technologies such as artificial intelligence, robotics and quantum computing. The United States is trying to attract enterprises to set up factories in the United States, so as to concentrate the advanced process (below 28 nm) chip manufacturing industry in the United States, to confront China’s challenges in the semiconductor field, and to safeguard the technological hegemony of the United States. According to industry data, in 1990, the United States accounted for 37% of the global semiconductor manufacturing industry, and in 2020, this proportion dropped to 12%.
In the related statement issued by the White House, the purpose of the "Chip Act" includes reducing costs, creating jobs, strengthening the supply chain and so on, so as to compete with China. To this end, the bill requires the establishment of four funds: the "American chip fund" totals 50 billion US dollars, of which 39 billion US dollars is used to encourage chip production and 11 billion US dollars is used to subsidize chip research and development; The "US Chip Defense Fund" has a total of 2 billion US dollars to subsidize the production of key chips related to national security, which will be allocated by the US Department of Defense in stages from 2022 to 2026; The "American Chip International Technology Security and Innovation Fund" has a total of 500 million US dollars to support the establishment of a safe and reliable semiconductor supply chain; The "American Chip Labor and Education Fund" has a total of 200 million US dollars to cultivate talents in the semiconductor industry.
As the largest chip market in the world, China consumes about 3/4 of the chips in the world. But in the global chip industry chain, China is in the middle and lower reaches. Chip industry has its unique internal structure and industrial characteristics, and its industrial chain is divided into five sub-chains. The first is design. The largest chip design company in the world is ARM in Britain, EDA in the United States occupies a monopoly position in software design, and the design capability of Huawei Hisilicon can reach 7 nanometers. The second is manufacturing, including finished products and semi-finished products. Among them, semi-finished products generally refer to wafers, and high-purity wafers are basically monopolized by Japanese companies; Chip products are made on the basis of wafers, and the international output of SMIC is currently the fifth in the world. The third is packaging testing, which is basically labor-intensive, and the gap between China and the world is not big. The fourth is equipment production. The most sophisticated EUV mask aligner is ASML, the Netherlands, which is the only enterprise that can provide 7 nm process mask aligner. The equipment manufacturers that produce wafers are mainly in Japan, and companies such as Mitsubishi and Sony are dominant. Shanghai Microelectronics has been able to produce equipment for making 28 nm chips. The fifth is auxiliary materials. Including photoresist, mask, target, packaging substrate, etc., these materials are still facing bottlenecks in China enterprises.
Geng Bo, deputy secretary-general of the Third Generation Semiconductor Industry Technology Innovation Strategic Alliance, told the Global Times reporter that "the layout of key patents involving upstream advanced process technology, some key raw materials, equipment and spare parts consumables is still not perfect". At present, there is a severe trade deficit in China’s integrated circuit industry, and some high-end chips are not completely self-sufficient. Take memory chips as an example. At present, American products account for half of the global market, South Korea accounts for about 25%, Japan accounts for 10%, Europe accounts for 8%, and China accounts for 3%.
Killing is mainly in the manufacturing process.
Recently, IC Insights, a well-known semiconductor research institution, released a report. In 2021, the chip scale consumed in China was about 186.5 billion US dollars, but the chip manufactured in Chinese mainland was only 31.2 billion US dollars, accounting for only 16.7%. The "Chip Act" of the United States mainly focuses on the following aspects, with the intention of strangling China’s chip industry in its infancy.
First, the technology, equipment and materials below 28 nm are blocked from China. Han Xiaomin, general manager of Jiwei Consulting, told reporters that the restrictions of the chip bill are mainly reflected in two aspects: First, supply chain resources such as equipment and materials related to advanced manufacturing are continuously prohibited from being given to local enterprises in China, and the research and development progress of China enterprises in the field of advanced manufacturing is suppressed; Second, chip companies supported by the Chip Act are required not to invest in advanced technology in Chinese mainland and continue to split the China market and the global supply system. Although the restrictions of the "Chip Act" mainly start from the manufacturing link, it will cooperate with a series of other restrictions. For example, EDA tools involving GAA process have just been banned from being used by China enterprises recently; Restrict American companies from providing China with the equipment needed to manufacture advanced chips; Pressure the Dutch government to ban ASML from selling deep ultraviolet mask aligner to China.
Secondly, through subsidies, it is forbidden for companies receiving US federal funds to significantly increase production of advanced process chips in China for a period of 10 years. Companies that violate the ban or fail to correct the violation may need to refund the federal grant in full. According to the BBC, in the past, all American equipment manufacturers received a letter from the US Department of Commerce, informing them not to supply China with equipment for manufacturing chips of 14 nanometers or less. Tim Archer, chairman and CEO of American chip equipment manufacturer Panlin Semiconductor, said at the latest financial report that the scope of US technology export control to China will be further extended to foundries that produce chips below 14 nanometers.
Before and after the "Chip Act" was signed, under the high-pressure atmosphere, many American semiconductor companies have announced that they will expand their investment in their own country. On August 9th, Micron announced that it will invest 40 billion dollars to make chips in the United States by 2030, and this action will be supported by the Chip Act. Reuters reported on the 8th that Qualcomm has agreed to purchase an additional $4.2 billion worth of semiconductor chips from Gexin’s new york factory, bringing its total purchase to $7.4 billion by 2028.
Finally, we should promote the establishment of the "Four-Party Alliance of Chips" to further restrict the development of chips in China. This is a chip industry alliance between the United States, Japan, South Korea and Taiwan Province, which is intended to monopolize the high-end chip industry. It wants to integrate the chip manufacturing industry of American allies and set up a chip supply chain in the United States to exclude competitors.
China’s Countermeasures
Industry experts believe that in the short term, the "Chip Act" involves high-end OEM of advanced manufacturing technology, and memory has a great impact on China. However, in the long run, it is the consensus of domestic industry to carry out localization in related fields, and the restrictions of the bill can only accelerate this process. Geng Bo said that the upstream semiconductor equipment and materials will benefit from the continuous expansion of production and the acceleration of localization in China Wafer Factory. In view of the macro-policy blessing of localization and the uncertainty of international situation and supply chain security, China semiconductor industry should do a good job in top-level design and overall layout, increase policy support, strengthen international cooperation outside the United States, enlarge and strengthen the head enterprise, increase the training of industry talents and discipline construction, and strive to establish a certain closed-loop supply capacity in the industrial chain to prevent the recurrence of "core shortage tide".
At the same time, for the United States, relying on a "chip bill" cannot reshape the glory of the local chip industry, and it is even more difficult to rebuild the manufacturing industry chain. Some industry experts said that the global "chip shortage" has been gradually eased this year, and there has even been a surplus in chip production, and many chips are being sold at reduced prices. This means that the chip industry is not a promising industry at least for the moment. Market investors are also confirming this judgment. After the release of the "Chip Act", the share prices of major semiconductor companies in the United States fell due to the decline in demand for early warning in the industry.
Han Xiaomin said that the "Chip Act" can alleviate the strategic anxiety of the United States by attracting leading enterprises to set up factories in the United States through subsidies. However, it is not optimistic that the United States will truly become an advanced technology manufacturing base. Some experts believe that although China has not broken through the high-end chip manufacturing technology for the time being, it has chip factories accounting for half of the world’s total, and the "Chip Act" of the United States will promote Chinese enterprises to break through the technology. The domestic manufacturing industry in the United States is hollow and lacks talents, and it is impossible to form independent chip production capacity in a short time. According to the estimation of the Boston Consulting Group and other institutions, if the United States adopts the policy of "hard decoupling technology" from China, it may cause American semiconductor enterprises to lose 18% of the global market share and 37% of the revenue, and reduce 15,000 to 40,000 high-skilled jobs. This is tantamount to luring domestic enterprises away from the China market with a drop in the bucket subsidy.