China’s semiconductor industry has become a major target of the United States, which has enforced a slew of export restrictions targeting several parts of the country’s chip sector supply chain as it attempts to slow its rival’s technological advancement.
While Beijing has invested huge sums of money into cultivating a domestic chip industry, its fabrication plants, known as fabs, still vastly rely on foreign-made equipment that they use to transform slabs of silicon into chips that power hardware.
Below are the Chinese fabs that are suffering the biggest brunt of Washington’s curbs:
SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORP (SMIC)
SMIC (0981.HK), China’s biggest fab, produces chips that go into a range of products for the automotive sector, some smartphones, and internet-of-things devices.
Started in 2000 with funding from the Shanghai government, the company stands as China’s would-be rival to Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW), though it is outclassed in technology and income. TSMC is the world’s most valuable chipmaker and counts Nvidia Corp (NVDA.O) and Apple Inc (AAPL.O) among its top clients.
Its government-backing and ambition to produce high-end chips captured the attention of the United States which added the firm to its Entity List in 2021. The placement effectively prohibits Dutch firm ASML Holding AS (ASML.AS) from supplying critical Extreme Ultraviolet lithography machines to SMIC, sinking that ambition.
To date, most of SMIC’s sales are produced using the outdated 45 nanometer process node and above. Since late 2021, this specialization in older chips has proven an advantage because of a global shortage of lower-end chips.
Still, its global market share in the pure-play foundry sector continues to be in the single digits, and its sales and research-and-development expenditure remain much lower than those of TSMC.
The firm surprised the industry last year when researchers learned it had made a chip that appeared to have similar qualities with TSMC’s 7 nanometer process node technology, even without ASML equipment.
Experts questioned the long-term viability of its breakthrough. SMIC is yet to respond to the findings.
HUA HONG SEMICONDUCTOR LTD
Hua Hong Semiconductor Ltd (1347.HK) is China’s second-biggest fab. It was started in 1996 and specializes in producing mature-node technology, earning most of its revenue from chips manufactured at the 55 nanometer process node and above.
The company has allocated fewer resources to manufacturing advanced nodes than SMIC. It wants to conduct another public offering this year, and aims to set up a new fab in the eastern city of Wuxi.
YANGTZE MEMORY TECHNOLOGIES CO LTD (YMTC)
YMTC is China’s sole player in the global NAND memory market – an ultra-competitive sector long dominated by a few companies from Korea and the United States. It designs and produces chips and was put on the U.S. Entity List in 2022.
While YMTC’s market share of the overall sector is low, experts said it has steadily joined the Chinese supply chain and that its products have become more competitive in quality and price.
It launched a chip in 2022 with 232 layers of memory cells, placing the company closer to rivals such as South Korea’s Samsung Electronics Co Ltd (005930.KS). Experts said equipment export restrictions are likely to prevent further efforts.
YMTC was started in 2016 with funding from the Wuhan government and China National Integrated Circuit Industry Investment Fund, and initially operated under chip conglomerate Tsinghua Unigroup. It was later spun out as its parent company restructured while going into bankruptcy.
CHANGXIN MEMORY TECHNOLOGIES (CXMT)
CXMT is China’s only key player designing and producing DRAM chips, which like NAND memory, is a sector long dominated by a few established companies in the United States, Taiwan, and South Korea.
It has one fab in operation and is constructing two others. It makes DRAM at the 19 nanometer node and is jumping into the 17 nanometer node – process nodes behind the industry cutting-edge.
Researcher Trendforce wrote that the impact from equipment export bans imposed since October might ruin expansion plans.
