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US-China chip ban failed

by on22 November 2023

Stockpiles kept China safe for a long time

The US-China chip ban failed because the Chinese stockpiled enough chips to keep them going until they could create them locally.

Bloomberg said that some of the leading producers of chip manufacturing technology have almost doubled the percentage of revenue they’ve generated from China since 2022.

Applied Materials, a California-based company that supplies equipment, services and software for the manufacture of semiconductors, reported that 44 per cent of revenue generated in the fourth quarter of its fiscal year 2023 came from China, compared to just under 20 per cent in the same quarter of 2022.

Lam Research, another California company that provides wafer fabrication equipment and services, saw revenue from China hit 48.5 per cent in September 2023, up from 30 per cent in September 2022.

The US government is not happy with the news. On the same day, Applied Materials published its earnings, it was reported that the US Justice Department was launching a criminal investigation into the outfit for evading export restrictions.

The company allegedly sent hundreds of millions of dollars’ worth of equipment to Shanghai-based Semiconductor Manufacturing International Corp (SMIC) via South Korea without an export license.

The accusations against Applied Materials are not the only way China has navigated the trade restrictions.

According to its annual report released earlier this week, the US-China Economic and Security Review Commission found that Chinese companies are routinely able to bypass the restrictions — which have been placed on chipmaking equipment that can manufacture advanced chips at the 14-nanometer node or below — by claiming the technology they’re purchasing is being used on older production lines.

“With limited capacity for end-use inspections, it is difficult to verify the equipment is not being used to produce more advanced chips," the report said.

What gave it away was when Chinese telecom giant Huawei produced a smartphone containing an advanced 7-nanometer chip.

The Huawei Mate Pro 60 contains Kirin 9000s chips — 7-nanometer chips made in China by the partly state-owned SMIC, according to an analysis published by TechInsights, a semiconductor research and analysis organisation.

The US barred SMIC from obtaining the machines necessary for producing 7nm chips in late 2020, and to date, the most advanced chip SMIC had been known to manufacture was a larger-scale 14nm semiconductor.

An investigation by the US Department of Commerce into how SMIC got hold of the technology is currently underway.


Last modified on 22 November 2023
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