0x04 US-China Competition over Semiconductors is Escalating
Export Controls on Chinese Memory Makers?
There are calls by a few US Senators to include the Chinese memory maker YMTC on the Entity List. This is an export control mechanism under which a company would require a license from the US government to export tools to YMTC.
This would be an escalation in the use of export controls. Huawei is already on the Entity List. But the reason for its inclusion was its connections with the Chinese military. There is no such allegation made in the case of YMTC. The reason cited is that it has received $24 billion in subsidies from the Chinese government and that the "company’s expansion and low-price offerings presents a direct threat to U.S. memory chip makers Micron and Western Digital."
To be sure, YMTC is not the industry leader in this segment. These calls illustrate how semiconductors have become a geopolitical zero-sum battlefield between the US and China.
Alexandra Alper and Karen Freifeld report for Reuters that the export control restrictions might extend beyond YMTC. There are rumours that the plan is to limit shipments of US-made chipmaking equipment to China for making NAND flash memories with more than 128 layers. This would hit the facilities of South Korean companies in China (Samsung and SK Hynix).
I think a broader export control restriction is unlikely, as it would put South Korean companies in a bind. The controls on YMTC might find more currency, though.
No free lunches
The $52 billion CHIPS and Science Act makes it clear that there are no free lunches for the recipients. Companies that receive this funding will be barred from "expanding production of chips more advanced than 28-nanometre ones in China - or a country of concern like Russia - for 10 years." Given that Russian defence companies are already on the Commerce Control List and there is barely any chip manufacturing in Russia, this policy will largely impact China. This clause is a clear sign to companies that they cannot continue to do business as usual in China if they want to benefit from US government largesse. An article in Financial Times focuses on the conundrum that South Korean chip makers face as a result.
It doesn't stop there. Max Cherney writes in Protocol that the US Bureau of Industry and Security is also considering an export control restriction on the supply of EDA software to China that would be used for making gate-all-around transistors. This technology hopes to improve chip performance without having to make the transistors smaller.
Pelosilicon
US House Speaker Nancy Pelosi met TSMC Chairman Mark Liu on a video call during her trip to Taiwan. Apparently, they also met over a dinner banquet, reports Taiwan News. This news again highlights how semiconductor contract manufacturers have become strategic actors in international relations.
All this happened over the last couple of days. Things are moving fast in Siliconpolitik.