US China chip war: reality, logic and thinking - Part 1

1.Chip Wars Background

Chips are the most important weapon of the country and the core technology related to national development and national security. The development of semiconductor chip technology over the past few decades has fundamentally affected and reshaped the global economy. As early as the Trump administration, the United States began to suppress and contain China's chip industry. President Biden signed the "Chip and Science Act", taking further measures to enhance the US's strong position in the chip field, preventing the Chinese chip industry from obtaining or manufacturing high-end chips, and launching a chip war against China. Completely blocking China's ability to manufacture high-end chips and its production equipment is the main goal of the United States in suppressing China. The China-U.S. chip dispute is an intensified and brand-new manifestation of historical logic (Cold War thinking). If we want to avoid being "stuck" in chip technology and win the battle of key core technologies, the most fundamental thing is to rely on self-reliance and technological innovation, and at the same time cooperate with chip design and manufacturing companies in various countries in the world that we can cooperate and communicate with. Actively carry out mutually beneficial and win-win cooperation to achieve technological breakthroughs.

As early as October 2016, the U.S. Presidential Advisory Committee set up a "semiconductor working group", regarded "enhancement of China's competitiveness" as a challenge to the United States, and proposed to strive to become a pioneer in the road of 3-5 nanometer semiconductor process technology. In January 2017, the U.S. President’s Science and Technology Advisory Committee published a report entitled Ensuring America’s Long-term Leadership in the Semiconductor Industry, which mentioned that “China’s frantic semiconductor construction boom has already posed a threat to the United States&rdquo, but the U.S. government did not take actual action for this. Since then, since President Trump came to power, the US policy toward China has undergone fundamental changes, and it has begun to regard China as the biggest national security threat and biggest competitor of the US. In May 2019, it began to take practical actions to suppress and contain Chinese chips. industry. President Biden continued, expanded, and enriched the Trump Administration's measures, signing the Chips and Science Actin August 2022. The bill will adopt a series of measures such as providing huge subsidies to the domestic chip industry in the United States and providing investment tax credits for semiconductor and equipment manufacturing, so as to encourage companies to build factories in the United States and enhance the strong position of the United States in the chip field. At the same time, the use of government power and financial subsidies has created pressure on global chip companies to "choose sides and join teams", unite with allies in the name of so-called values, and compete unfairly with China and other "countries of concern", disrupting global The normal order of the chip industry chain.

From the perspective of bilateral relations between China and the United States, the "Chip and Science Act" relies on the strong push of the government. On the one hand, it tries to strengthen the "chip strength" of the United States (the competitiveness of the entire chip industry), maintain the "hegemony" of the United States in the chip industry, and on the other hand On the one hand, it tries to weaken China's chip strength, "self-improvement and suppression of others" and "strengthening the United States and weakening China". In the final analysis, it is to expand the chip strength gap between the United States and China, delay the development of Chinese-style modernization, and curb China's strong rise.

2. The U.S.’s suppression of China’s chip industry and technological containment

From the Cold War era to the post-Cold War era, the United States successively implemented technology export controls on China through the Paris Coordinating Committee and the Wassenaar Agreement. Since the Trump administration, the United States has implemented precise restrictions, containment, and pressure measures especially targeting China's semiconductor chip industry. Since 2019, many leading companies in the high-tech industry, including ZTE, Huawei, SMIC, have been sanctioned by the US government. The technical sanctions and restrictions imposed by the United States on China's chip industry can be described as comprehensive and layer-by-layer, covering many aspects such as chip products, chip design software, chip manufacturing equipment, and the operation of Chinese and foreign chip companies in the mainland, launching an unprecedented technological containment of China .

(1) Prevent chip production and supply

In 2018, the U.S. government banned U.S. companies from selling chips to ZTE on the grounds that ZTE had violated its contract with the U.S. Department of Commerce. In 2020, the U.S. Department of Commerce banned chip foundries from using U.S. equipment to produce chips for Huawei, and emphasized that not only U.S. companies, but also chip companies from other countries that use U.S. technology, software, and equipment are not allowed to provide chips for Huawei. Chips are designed using American software and technology.

In 2020, the United States will cut off the connection between TSMCand Huawei HiSilicon, Tsinghua Unigroup, and prevent TSMC from providing chips to Huawei through third parties. This move can be called a chip technology war between China and the United States. major upgrade. As a top chip design company, Huawei HiSilicon ranks among the top ten semiconductor manufacturers in the world in the first half of 2020. Its designed Kunpeng processorand its own Kirin chip(using TSMC to high-end chip), which is highly competitive internationally. Huawei HiSilicon accounts for 14% of TSMC's revenue, and Huawei has become TSMC's second-largest customer. However, under the pressure of the United States to force TSMC to cut off the supply of chips, Huawei HiSilicon's business had to shrink significantly. The "Chip and Science Act," which came into effect in August 2022, also stipulates that companies receiving federal subsidies cannot significantly increase production of advanced process chips below 28 nanometers in China, and prohibit any company from supplying Huawei with mass consumer electronics products such as mobile phones and tablet computers. Advanced process chips in . At the end of August of the same year, the US government notified NVIDIA and other US companies to prohibit the supply of artificial intelligence chips to China, because they were worried that the chips would be used for military purposes.

(2) Cut off supply of chip design software EDA

In May 2019, the United States stipulated that Huawei cannot use American chip design Electronics Design Automation (EDA) software. In August of the same year, the US Department of Commerce formally decided to ban the sale of the software to China. EDA is a kind of industrial software. Its market size is small, but it plays an extremely important role in chip design. It is called the "mother of chips". Especially for China, more than 95% of the EDA software it uses mainly depends on imports from the United States (the United States only has three local giants Kaden Electronics, Synopsys, Mental Graphics accounted for 74% of global sales)

From the ban on the export of chips to China to the ban on the sale of EDA software, it shows that the US's suppression of China's chip industry has upgraded to the "upstream" of the chip industry chain, which is another evil move to strengthen the technical containment of China's chip industry. At the same time, the U.S. Department of Commerce issued four emerging and basic technologies involving advanced semiconductors, including EDA and Electronic Computer-Aided Design (ECAD) software, which "have significantly increased military potential". Implement new export controls. Such technologies may not be able to enter the global supply chain if the company applies for an export license but the US government does not allow it.

(3) Cutting off the supply of chip manufacturing equipment

In 2022, the U.S. Department of Commerce requires all U.S. chip production equipment manufacturers not to export 14nm and below chip production equipment to China, showing that its export control scope to China has expanded to semiconductor manufacturing equipment. In order to strengthen the suppression of China's chip industry, the United States has expanded the scope of restrictions on the export of chip manufacturing equipment from the previous "within 10 nanometers" to "within 14 nanometers" (this coincides with the fact that the United States learned that in 2019 SMIC and other With 14nm technology and production capacity "docking"), trying to "lock" China's ability to manufacture advanced chips at 14nm without any further improvement. This restriction will not only affect SMIC, but will also affect foundries such as TSMC operating in mainland China. Later, relevant restrictions expanded from production equipment to installation and maintenance, such as prohibiting suppliers from providing follow-up services for equipment exported to China, making it more difficult for Chinese companies to increase chip production capacity and innovate breakthroughs in the future.

For chip development and production, lithography machineand EDA software are two extremely important core links. While the United States banned the sale of EDA software, it also tried its best to prevent the Netherlands ASML (ASML) company from selling lithography machines to China, which caused ASML to not supply advanced lithography machines to SMIC for a long time. As a result, companies such as SMIC can only stagnate at the 14nm node, and cannot reach the 7-10nm process in the foreseeable future. In order to protect its own national interests, the Netherlands once resisted the pressure from the United States, saying that it would not completely follow in the footsteps of the United States and did not want to give up The huge profits in the Chinese market, but because ASML uses components made in the United States, is subject to the United States at the technical and political levels. As a result, the Netherlands is finally unable to withstand the pressure of the United States. In December 2022, it agreed with the United States to ban the sale of manufacturing products to China. Equipment required for 14nm or more advanced process chips. At the specific implementation level, ASML is prohibited from selling DUV immersion lithography machines to China (its advanced level is one generation lower than EUV lithography machines, and it is the necessary hardware for manufacturing chips with a process of 7 nanometers or more). This shows that compared with the previous ban on the sale of extreme ultraviolet lithography machines (EUV) to China (which can manufacture 5nm and 3nm chips), the scope of the new Dutch technology control on China has been further expanded. Since then, the only possible channels for Chinese companies to purchase DUV lithography machines are Nikon and Canon in Japan. At present, chip manufacturers in mainland China mainly use tools such as DUV lithography machines to manufacture 14nm process chips. In the absence of DUV immersion lithography machines, it is difficult to expand production and continue to march toward "advanced manufacturing processes".

(4) Restrict chip-related companies from carrying out normal economic and trade activities in China

In March 2016, the U.S. Department of Commerce included ZTE and other Chinese companies in the "Entity List" and imposed export restrictions on ZTE. The so-called "Entity List" and related regulations are export controls established by the United States to safeguard its so-called "national security interests". items.

In May 2019, according to an order signed by President Trump, the U.S. Department of Commerce formally included Huawei and 70 affiliated companies in the U.S. "Entity List" on the grounds of "technical network security", prohibiting Huawei from operating in countries without the approval of the U.S. government. Under certain circumstances, it obtains chips, semiconductor components and related technologies from US companies. In August of the same year, the U.S. Department of Commerce once again upgraded the ban, further tightening restrictions on Huawei's access to U.S. technology, and at the same time included Huawei's 38 subsidiaries in 21 countries around the world in the "Entity List", showing that the U.S. is extremely serious about Huawei. Do your best to suppress the mentality.

In March 2022, the U.S. Department of Commerce threatened to cut off normal trade between Chinese companies such as SMIC and U.S. companies on the grounds that some Chinese companies still maintained business contacts with Russia and violated relevant U.S. regulations.

In August 2022, the "Chip and Science Act" prohibits companies from various countries receiving US subsidies from investing in or expanding advanced process chips below 14 nanometers in China, Russia and other specific countries that "pose a threat" to the United States for a period of ten years. The ban requires enterprises to refund the subsidies received in full. On the other hand, semiconductor companies from various countries that build factories in the United States will not be able to obtain subsidies if they also build or expand advanced semiconductor manufacturing factories in China at the same time. Companies that currently have semiconductor factories in both China and the United States, including TSMC (Nanjing), South Korea’s  Samsung (Xi’an) and Hynix (Dalian), etc., if they accept US subsidies, they may be limited to If China builds or expands an advanced process fab, can only choose to go to the United States to build an advanced process fab. The purpose of the U.S. move is to block the channel of chip technology cooperation between mainland China and South Korea, Europe, Japan, and Taiwan on the one hand, and to encourage U.S. and foreign chip-related companies to flow to the U.S. on the other.

In October 2022, the United States began to directly attack American semiconductor companies in China, and introduced new regulations to restrict semiconductor exports to China. The new regulations make it impossible for the American-funded semiconductor equipment manufacturer Fanlin Group in China to continue to sell to Chinese manufacturers the high-end chips that can be used to manufacture non-planar logic chips below 14 / 16 nanometers. Semiconductor equipment and technology will reduce the revenue of Lam Group by 2 billion to 2.5 billion US dollars in 2023. The group has started layoffs for the team in China. The first batch of layoffs will exceed 10%, and subsequent layoffs may further expand. Meanwhile, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a new, wide-ranging set of export control measures for the export to China of advanced artificial intelligence and supercomputing chip manufacturing, production equipment, and certain The tool imposes new restrictions aimed at preventing China from acquiring the high-performance computing capabilities that require the use of advanced semiconductors.

The United States’ suppression of China’s chip industry is not limited to material aspects such as chips, equipment, and raw materials, but also restricts (actually prohibits) Americans (U.S. citizenship or permanent residence) from working in China’s chip industry. With the continuous suppression of China's chip industry by the United States and the rising labor costs in China and other factors, foreign and Taiwan-funded chip companies in mainland China are gradually showing a trend of "estrangement" from the mainland. For example, in the past 20 years, 150 of the largest suppliers of Apple in the United States have set up factories in China, and Chinese factories have produced more than 90% of Apple products, and Chinese consumers have contributed nearly 25% of Apple’s annual revenue. . However, as large U.S. technology companies have recently been under the pressure of the U.S. government, Apple has managed to seek new partners in India and Vietnam since 2022, starting the difficult road of “leaving China” (China currently accounts for Apple’s technology and capital. The proportion of intensive component production is still quite large, and it is really not easy for Apple to "decouple" from China, its most important manufacturing base).

As mentioned above, there are countless examples of the United States restricting and suppressing Chinese chip companies and chip-related foreign-funded companies that carry out normal economic, trade and investment activities in China. To achieve significant progress in the field, focus on targeting and suppress precisely, the chip war launched by the United States against China is almost crazy.

3. The historical logic and practical reasons of the Sino-US chip dispute

In the 1940s and 1950s, semiconductor transistors and integrated circuits were born in the United States. After experiencing the popularization of mass electronic consumer goods such as transistor radios and electronic calculators in the 1950s and 1960s, the personal computer revolution in the 1980s, the Internet revolution in the 1990s, and the smartphone and social media revolutions in the early 21st century were all based on integrated circuits. That is, on the basis of semiconductor chips.

In the 1940s and 1950s, semiconductor transistors and integrated circuits were born in the United States. After experiencing the popularization of mass electronic consumer goods such as transistor radios and electronic calculators in the 1950s and 1960s, the personal computer revolution in the 1980s, the Internet revolution in the 1990s, and the smartphone and social media revolutions in the early 21st century were all based on integrated circuits. That is, on the basis of semiconductor chips.

(1) The historical logic of the Sino-US chip dispute

The chip dispute between China and the United States is not an accidental event, but a historical continuation and latest manifestation of the long-term embargo, blockade and suppression imposed by the United States and other Western countries on the technological development of socialist countries. As early as after World War II, on March 5, 1946, British Prime Minister Winston Churchill delivered the "Iron Curtain Speech" in the United States, which opened the prelude to the Cold War. On March 12, 1947, U.S. President Truman proposed "containing communism" as the guiding ideology of the country's political ideology and foreign policy, marking the beginning of the Cold War. In November 1949, in order to limit the development of the socialist camp headed by the Soviet Union, under the initiative of the United States, 17 countries including the United States, Britain, Japan, France, and Australia secretly established a coordinating committee in Paris (historically known as " Batumi"), whose purpose is to restrict the export of strategic materials and advanced technology by member states to socialist countries. The embargo list includes three categories of military weapons and equipment, cutting-edge technology products and rare materials, and tens of thousands of products. In 1952, "Batumi" established the China Committee, which was specifically responsible for the embargo against China. The Soviet Union collapsed in 1991 and "Batumi" was disbanded in 1994. In 1995, 28 countries, including 17 former members of "Batumi", held a meeting in Wassenaar, the Netherlands, and reached an agreement to undertake the work of "Batumi". In 1996, 33 countries signed the Wassenaar Agreement in Austria. Like "Batumi", the "Wassenaar Agreement" also includes a detailed control list, covering "dual-use" products such as electronic devices, computers, telecommunications and information security, advanced materials, material processing, sensing and lasers, and Technology also includes various weapons and ammunition, equipment and combat platforms. Socialist China remained among the embargoed countries, while Russia, which had disintegrated from the Soviet Union, became a member of the Wassenaar Agreement. Obviously, the Wassenaar Agreement is a "Cold War-type" organization that emerged in the post-Cold War era and continued the Cold War ideology.

Although the Wassenaar Agreement allows member states to control their respective technology exports on a voluntary basis, in fact the member states are still influenced and controlled by the United States on important technology export decisions. In 2004, the Czech government approved the sale of 10 "Vera" radar systems by the Czech Arms Export Corporation to China with a total value of 55.7 million U.S. dollars, but the contract was canceled under pressure from the United States. In 2006, China and Italy's Alenia Space Company signed a cooperation agreement to launch Italian satellites, but due to the intervention of the United States, Italy finally canceled the cooperation agreement at the cost of economic and reputation losses. In the field of semiconductor technology, the inability of SMIC to purchase advanced lithography machines is also related to the restrictions of the Wassenaar Agreement.

Transistor and Integrated Circuit were successfully developed by the United States in the late 1940s and 1950s for military purposes such as the miniaturization of weapons and equipment. By introducing military technologies such as transistors and integrated circuits from the United States, Japan transferred them to the manufacture of popular civilian products. Because the competitiveness of the civilian market was far greater than that of the military market, Japan’s chip technology was rapidly developed and once surpassed that of the United States. From 1980 to 1986, the proportion of American chips in the global chip market dropped from 61% to 43%, while that of Japan rose from 26% to 44%, surpassing the United States to become the world's largest chip producer. In 1990, among the top ten chip companies in the world, Japan accounted for six, NEC, Toshiba and Hitachi ranked the top three, Intel only ranked fourth in the world, South Korea’s Samsung has not yet Into the top ten. As we all know, the integrated circuit is to shrink and shrink electronic devices such as transistors. The "small and precise" integrated circuit is suitable for the core devices of civilian electronic consumer products such as mobile phones, and is increasingly becoming an indispensable key for weapons and equipment such as high-precision missiles. device. From the perspective of "Batumi" to the "Wassenaar Agreement", semiconductor chips are both military and civilian products and weapons and equipment products, and they are definitely dangerous objects that must be strictly controlled, especially those that must be restricted by socialist China. Sophisticated technology.

Significantly, the "U.S.-Japan semiconductor war" and the "Sino-U.S. chip war" are both the world's bosses' suppression of their second sons who they consider "threat". However, as far as the chip industry is concerned, compared with Japan, whose share of the global chip market and per capita GDP exceeds that of the United States, which does make the United States feel "threatened", the global market share of China's chips is only one-tenth of that of the United States. Obviously, the industry will not pose any real threat to the United States. So why is the United States launching a chip war against China?

Since 2019, the United States has suppressed and blocked China's chip industry with technology, which is exactly the historical logic and Cold War thinking of embargoing, blocking, restricting and suppressing the development of socialist China's science and technology in the past 70 years from "Batumi" to the "Wassenaar Agreement". continuation and reinforcement. On this point, there is obviously a qualitative difference between the "China-US chip war" and the "US-Japan semiconductor war". As we all know, during the Cold War, in order to deal with the threat of the Soviet Union, the United States and Japan formed a dependent alliance of "the United States as the master and the sun as the follower". It was the "second defeat" after World War II), and it can also be said that there was no real "war". However, the current Sino-US relationship is the relationship between a rising socialist China and a hegemonic capitalist US. For a long time, China has made great efforts to promote the establishment of a new type of major-country relationship between China and the United States in which "mutual benefit and win-win results" replace "zero-sum disputes". The United States has misgivings about China’s rapid rise, and regards China’s increased competitiveness as a challenge to the United States. In particular, it believes that China’s semiconductor construction poses a “threat” to the United States. An extension of historical logic.

(2) The actual reasons for the chip dispute between China and the United States

With the great attention and support of the Chinese government, China's chip industry has indeed undergone tremendous development, especially since 2017, the design capabilities of China's local semiconductor companies have continued to grow, and the relationship between excellent design companies Huawei HiSilicon and TSMC has developed . But in general, the development of China's chip industry is far from reaching the so-called level of "harming the economic interests of the United States, severely damaging American technological innovation, and endangering the national security of the United States." In 2021, American companies will account for 54% of the global chip market (total sales of IDM and foundry chips), while mainland Chinese companies will only account for 4% of global chip sales, a difference of 13.5 times. Although the strength of Chinese technology companies in the fields of fifth-generation mobile communication technology (5G), artificial intelligence, and mobile communication continues to increase, China's large-scale investment in the chip industry in recent years has reached the level of investment in the "Apollo Moon Landing Project" (excluding inflation). factors), but China's huge investment in the chip industry has not produced significant results, and semiconductors are still a strategic bottleneck for China.

However, China does pose a "threat" to the United States in another high-tech field, which is 5G, which can be called the infrastructure of the digital economy. In the 2019 ranking of the number of core essential patents for the global 5G standard, the technical standard patents of Huawei, a Chinese company, greatly surpassed that of the United States. One trick is to cut off the supply of chips to Huawei, which will hit Huawei's mobile phone business hard. However, when the focus of people's attention is still on the trade conflict and the US's suppression of Huawei/5G, the "China-US 5G dispute" has prompted a new level of chip importance: 5G is the most important application field of chips One of them is that chips are a more basic and powerful weapon to extensively curb China’s development in 5G technology, mobile communications, artificial intelligence, quantum computing, Internet of Things, big data, cloud computing and other high-tech fields. Weaknesses in the chip industry, preventing China from developing high-end chips is a more in-depth suppression and a more sophisticated strategy for China's high-tech development. Therefore, while the United States continued to suppress Huawei/5G, it turned its main spearhead to the Chinese chip industry, which is extremely important to China's development and security, but is far from posing a "threat" to the US chip industry. Obviously, the United States' suppression of China's development of high-end chips is essentially a suppression of China's rise and the rejuvenation of the Chinese nation. At the same time, the Ukrainian crisis shows that wars in today's world are becoming increasingly "high-end". The United States suppresses China's research and development of high-end chips and its manufacturing equipment in order to prepare for future "high-end wars" on the platform of next-generation weapons and equipment.

A fact that is closely related to the chip war launched by the United States against China is that the United States has a sense of crisis about its own "shortcomings in chip advantages". This is the fact that insufficient chip manufacturing capacity has become the biggest shortcoming of the US chip industry chain and a weakness that it is eager to make up for. U.S. demand for semiconductor chips in 2021 is 17% higher than in 2019, but chip manufacturing capacity has not increased.  Moreover, the existing chip manufacturing in the United States is technically backward and cannot be used to make the latest advanced chips developed by companies such as Intel and TSMC. The fragile semiconductor supply chain has caused almost every related industry in the United States to face the threat of chip supply chain interruption. risk. The United States has always relied on Asian chip manufacturers such as TSMC and Samsung to provide high-end chips, but nearly 90% of the world’s chip manufacturing capacity is located in East Asia—mainly Taiwan and South Korea, which makes the United States likely to face trade disputes and military conflicts Significant risk of supply chain disruption. The United States obviously cannot accept that the main manufacturing capacity of advanced semiconductors is far away from the United States. It is especially worried about TSMC, which is located in Taiwan Island, which is owned by China, invests in setting up factories in mainland China, and provides high-end chips for Huawei for a period of time. In May 2020, the United States finally lured TSMC to agree to build two factories in Phoenix, Arizona, which will start producing 4nm and 3nm chips in 2024 and 2026, respectively. At the same time, the United States has also used measures such as financial subsidies and investment tax cuts to encourage South Korea and other chip-related companies to further invest in the United States to build factories, making the United States a chip manufacturing (or foundry) company with 5 nanometers and below and related supporting ecology The "preferred location" of the system, thus forming the basis for supporting the United States' 5G/6G communications, artificial intelligence, quantum computing and other contemporary and next-generation cutting-edge technology and military technology development strategies. By overcoming the shortcomings in chip manufacturing, the United States is expected to further expand the chip generation gap ahead of China. Obviously, the United States' competition for TSMC is a major "battle" in its competition with China's chips.

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