Taiwan Semiconductor Manufacturing Company falls into line with US export controls on Huawei
- TSMC confident Huawei Kirin chips won’t be a huge loss.
- US trade officials say the TSMC pledge to build a US$12 billion plant is example of bringing tech supply chain home.
- Huawei is trying to purchase mobile phone processors from MediaTek and Samsung.
- TSMC officially declared that they will completely cancel Huawei chip orders and confident Huawei Kirin chips won’t be a huge loss.
One of the biggest of those is semiconductor producer TSMC, though the Taiwan-based foundry seems not to be that anxious even if it loses Huawei. According to the latest report from Taiwan media, TSMC has previously classified the original, all the chip manufacture capacity of Huawei HiSilicon in the fourth quarter has been released and has been gradually opened to other customers, which means that TSMC has not applied for the appropriate “license”, and has to withdraw Huawei chip orders. It also means that the follow-up TSMC will also be incapable to continue to offer Huawei with chip foundry services.
A US prohibition on foreign companies’ sales of chips to Huawei Technologies if American equipment or software is involved will weaken America’s already-feeble position in the global semiconductor equipment market, industry sources say.
Although the chairman of TSMC has said many times: “TSMC does not want to lose this big customer of Huawei, TSMC chair Mark Liu seems confident his company would be able to recover from that potential loss.”
Liu says that it would be able to fill quickly in gaps in orders should it really lose HiSilicon. How quickly it will be capable to do that, he doesn’t say. It does, however, suggest Huawei’s impact on TSMC won’t be as big as some consider it would be.
According to Electrical Engineering Times, Samsung, the world’s biggest fabricator of memory as well as logic chips after Taiwan Semiconductor Manufacturing Corporation, already has set up a small production line for top-of-the-line 7-nanometer chips using only Japanese and European chip-making tools.
The top five equipment manufacturers in the world represent 65% of the international market. These companies bear capital, technology, customer resource and brand advantages. Among them, America’s Applied Materials ranked first with a market share of 17.7%; Lam Research ranked fourth with a 13.4% market share and KLA-Tencor, with 5.19%, ranked fifth. Collectively, the three companies represent 36.31% of the global semiconductor equipment market, as said by SEMI.
EE Times has reported that Huawei is trying to purchase mobile phone processors from MediaTek and Samsung. Supply requirements are expected to be introduced officially in the second half of the year.
According to EE Times, the key equipment for semiconductor production is basically monopolized by American and Japanese companies. Although China’s chip manufacturing industry has a foundation and customers, there is still a huge technical gap with the West, particularly in the areas of high-end process chips, single crystal furnaces, oxidation furnaces, CVD equipment, magnetron sputtering coating equipment, CMP equipment, lithography machines, coating/developing equipment, ICP plasma etching systems, probe stations and other equipment markets.
MediaTek reports “an internal tendency to apply to the United States for export approval.” Industry insiders report that Samsung, in the past, has rejected Huawei’s request to purchase Exynos processors. Samsung may again do so.
TSMC declared that it will open a new 5nm factory in the United States. The plant is scheduled to start construction in 2021 and start production in 2024. Total expenditure will reach approximately US$ 12 billion in the next 10 years. According to TSMC, their 5nanometer investment in Taiwan has reached 23 billion US dollars.
At the same time, Samsung declared it will open a new production line in Pingze City, south of Seoul, and begin mass production of 5nm chips in the second half of next year. Previously, Samsung had planned to start producing this chip on the manufacturing line in Hwaseong, South Korea this year.
On May 26, the Nikkei Asian Review published an article entitled “As the United States Fights Huawei, Samsung and TSMC’s Competition Heats Up”, saying that the U.S. Department of Commerce announced new regulations to attack Huawei’s chip supply chain. The report said that the two Samsung production lines will use the most advanced ultraviolet technology for chip manufacturing, and that Pingze’s new production line will invest approximately US$8.1 billion. Samsung also promised to invest about US$107.7 billion in chips and its foundry business by 2030.
A decade ago, China recognized that its initial success as the world’s low-cost factory was going to run its route. As the cost of Chinese labor increased, other countries like Vietnam could fill that role. As a result, China needed to develop more advanced and sophisticated products on par with the United States. However, most of these products required custom chips and China lacked the domestic manufacturing capability to make them. China uses 61 percent of the world’s chips in products for both its domestic and export markets, importing around $310 billion worth in 2018. China recognized that its inability to manufacture the most advanced chips was a strategic Achilles heel.
At the beginning of the semiconductor manufacturing process, monocrystalline silicon wafers are turned into chips. This procedure requires oxidation, coating, photolithography, etching, ion implantation, physical vapor deposition, chemical vapor deposition, polishing, wafer inspection and cleaning. Back-end processes include packaging and testing, backside thinning, wafer cutting, patching, wire bonding, molding, cutting tendon/forming, and final testing.
Everbright Securities analysts indicated that while Huawei’s mobile phone chips can compete with Apple and Qualcomm, it is inseparable from TSMC’s advanced manufacturing process. If TSMC really distances itself from Huawei, Huawei can only rely on chips from SMIC and other manufacturers. Some analysis indicates that this is a rare opportunity for the mainland semiconductor industry. However, there are also reports that Huawei’s business eats up most of SMIC’s capacity. This can delay orders from some small and medium-sized IC design companies in China.
Given that China has more progressive options than the United States. It is assuredly time for those in charge to contemplate where this might lead. The chip ban gives the world a massive incentive to circumvent the US, raising the risk that the US rather than China will be left without a chair when the music stops.