Semiconductors, a general term for chips, can be found in thousands of products, including smartphones, computers, and medical equipment. It is also an advanced and critical component of military electronic systems.
The restrictions adopted by the United States are deemed as measures to “choke off China’s access” to high-end chips made and designed in the United States and relevant American technologies and equipment.
The Chinese regime has been beefing up efforts to boost its domestic capacity for designing and manufacturing semiconductors, hoping to reduce imported chips to 30 percent by 2025, according to China’s state-run media CCTV in 2020.
Highly Internationalized Supply Chain
The semiconductor industry is a very specialized one that needs cooperation and sharing of resources among various sectors in different countries and can’t succeed simply by throwing money at it, according to Chiou Jiunn-rong, a professor at the Department of Economics, Taiwan’s National Central University.“The semiconductor industry is extremely vast and complex,” said Mr. Chiou. “Much of the research and development, as well as patents, are in the United States. Crucial compounds are in Japan, lithography equipment is in the Netherlands; and in Taiwan, you have a group of hardworking and diligent skilled workers.”
Mr. Chiou added that, with the U.S. sanctions on exports to China, it would be very challenging for the Chinese regime to combine all these sectors in China, which will take at least 10 years and billions of dollars to do so.
He cited the United States as an example. Although the United States has the know-how of cutting-edge chip technology, it still needs Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) to set up its fabs in the United States for the production of chips.
Components and Equipment Controlled by Allies of the US
Tai Chih-Yen, a Taiwanese expert on international economics, told The Epoch Times that most of the key chemical compounds are in Japan.“In the 1980s and 1990s, Japan replaced the United States to be a major player in the semiconductor manufacturing industry and it took over the production of chemical products from the U.S. This advantage of Japan has remained unshaken to this day,” said Mr. Tai.
Mr. Tai is an associate research fellow at the International Economic Research Division of Taiwan’s Chung-Hua Institution for Economic Research (CIER), specializing in industry strategy management and emerging technology and entrepreneurship.
He added that, even though Taiwan has been developing semiconductors for a long time and has many specialty chemicals, it still cannot replace Japan, because Japanese companies own many of the key processes and patents in the production of these chemicals.
“Japanese companies are very powerful in this regard. Their supply has always been very stable. If you want to find a second source to replace it, sometimes you may encounter issues with purity and stability,” said Mr. Tai.
The EUV lithography systems produced by the Dutch ASML are at a level of sophistication that can’t be easily surpassed in a short time by any of its opponents, according to Mr. Liao.
ASML spent more than €6 billion in EUV R&D over 17 years, according to the Dutch company. A lithography machine is a highly precise instrument with extremely stringent requirements for precision. To integrate so many components and achieve such high precision, there is a lot of know-how involved, Mr. Liao said.
“It’s not something that can be caught up within just five or ten years,” Mr. Liao said.
“When China finally manages to produce something using its domestic technology, it will be ten years later than that of the Western manufacturers, and the quality of the products would be rather poor. For example, Huawei’s recent phones are installed with chips produced with out-of-date [Chinese] technology and they easily get hot,” said Mr. Liao.
Following the export bans of the U.S. government, the Chinese semiconductor industry has felt the stranglehold recently.
Moore Threads Intelligent Technology Beijing Co., a Chinese developer of graphics processors and AI accelerators set up three years ago, reportedly plans to cut a single-digit percentage of its roughly 1,000 employees after it was put on the U.S. entity list in October.
China Lacks Skilled Workers That Taiwan Has
Brad Liao, a senior IC design manager based in Taiwan, agreed with Mr. Chiou in that Taiwan has a very competitive advantage—its pool of skilled workers in the semiconductor industry, who are hardworking, diligent, and responsible.He told The Epoch Times in an interview that there was a significant earthquake that struck Taiwan in October that had a substantial impact on semiconductor equipment. After the earthquake, TSMC’s engineers immediately rushed back to the factory to check if the equipment had any issues and to ensure they operated properly because TSMC’s factories run around the clock.
“That’s why TSMC has a yield rate of over 90 percent, which is much higher than that of its competitors, which is 80 percent and below,” said Mr. Liao.
Mr. Tai said that China also lacks skilled workers in the design and manufacturing of semiconductors.
Possible Tricks to Circumvent the Chip Ban
Facing the American export prohibitions and China’s need for cutting-edge chips, the communist regime is likely to adopt various tricks to obtain foreign skilled workers and technologies, warned the China experts.
Mr. Tai said that Western democracies should not sell products with advanced chips to China.
“Sony had a gaming console called PlayStation, which had a 128-bit GPU inside. However, this game console was banned from being sold to North Korea, mainland China, and Russia at that time. This was because the chip in the game console developed by Sony had very strong computing capabilities and could be repurposed for missile guidance,” he said.
He added that Russia used refrigerator chips in missiles in the Russia-Ukraine War. “It might be necessary for the West to reevaluate what things could now potentially be transferred to China through commercial products unnoticed.”
Another possible way for the CCP to avoid the chip ban is to skip the current chip technology and tap into more advanced systems that are currently not banned, such as photonic chips and quantum computers that are still in the experimental and research stages, Mr. Tai said. He reminded the West not to share any research or experiment information and data with the CCP.
“The CCP is also investing in these areas, and if we don’t start to restrict these technologies at the beginning, could it possibly make a leap in development and take the lead in these areas?” said Mr. Tai, adding that the CCP’s past experience of developing its mobile phones is a lesson for western countries.
The Chinese regime began its mobile telecommunication by imitating and copying the achievements of the West for its first-generation (1G) to third-generation (3G) telecommunication system. It gradually caught up with the West in the fourth generation (4G), and Chinese companies such as Huawei and ZTE emerged in the global market competition. Huawei later became a major player in the fifth-generation (5G) telecommunication system and participated in setting the standards of research and development and commercial testing of 5G systems.
Western countries, including the United States, Australia, and Japan, have banned Huawei from building its 5G networks in their country due to Huawei allegedly committing cyber espionage, intellectual property theft, and trade violations in foreign countries.
