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Mix3018 best
Mix3018 best

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Rise of IC Industry

U.S. restrictions on Huawei seem to have no end in sight. On August 17, the U.S. Commerce Department expanded its curb on the Chinese tech giant to cut off all its access to U.S. technology-backed components.

It also added another 38 Huawei affiliates to its economic blacklist, which indicates they are required to obtain a license from the U.S. Government when they “act as a purchaser, intermediate consignee, ultimate consignee, or end user.”

“It basically blocks the way for Huawei to directly purchase chips from other chip manufacturers that use U.S. technology,” Jia Mo, an analyst at market research company Canalys, said.

Richard Yu, President of Huawei’s consumer unit, said at a press conference on August 7 that this year may mark the last year of production for Huawei subsidiary HiSilicon’s Kirin high-end chips with U.S. limits on chip manufacturers.

Huawei was put on the U.S. Entity List in May 2019, and the successive sanctions since then have become a wake-up call for the company as well as the country to rethink the path of chip development.

Mix3018 center IC
Mix3018 center IC

On August 4, the State Council rolled out an array of measures to buoy integrated circuits (IC) and software sectors, including tax breaks, financing support and international cooperation, so as to boost industrial innovation and improve the quality of development.

“It showcases the government’s desire to build a globally competitive semiconductor sector, and will encourage companies to devote more resources to overcome technological bottlenecks,” Wang Peng, deputy head of the China Center for Information Industry Development, said

A 2006 book on China’s IC development notes that China’s top officials felt “astonished” after visiting Samsung’s IC production line in the Republic of Korea (ROK) in the 1990s and became more determined to push forward China’s IC industry.

The period of modernization of the ROK nearly equals the time the country took to surpass the U.S. and Japan in the semiconductor sector. IC, regarded as the “staple” of modern industries, has become a vital terrain for major competitors.

Mix3018 modern
Mix3018 modern

“Currently, the interplay of industrial reform, pandemic and superpower games has exposed the security risks in the supply chain of China’s information and communication technology industry, and it is crucial to increase policy support and take measures in the sectors of high-end chips and fundamental software,” Xu Yaqian, a researcher with the China Center for Information Industry Development, told People’s Daily.

China has been rolling out policies on a 10-year basis since 2000 to improve the environment for IC and software industries, and has made progress in the past years. In the IC industry, some sectors have kept pace with their international counterparts, and chips for mobile terminals have nearly reached the advanced global standard. Some frontier software like cloud computing, big data and artificial intelligence have made quick breakthroughs. Both sectors have seen rapid growth since 2013.

However, there are gaps compared with developed countries as China’s chip industry started late. Li Baoming, an associate professor at the School of Public Policy and Management of Tsinghua University, told Zhonghongwang.com, a news portal of the National Reform and Development Commission, that China lags behind developed countries and regions in two aspects.

Mix3018 quality
Mix3018 quality

First, its products are not as mature as those of developed countries. For example, Semiconductor Manufacturing International Corp. (SMIC), a state-backed Chinese mainland company, is able to produce 14-nm chips, while Taiwan Semiconductor Manufacturing Co. can make 5 nm ones with its 3 nm production on the way. Besides, key equipment and technologies are still dominated by developed countries like the U.S., European countries and Japan, and there is a long way to go before China can reach that level.

While largely depending on imports, IC has become a weak link in China’s hi-tech development. According to the General Administration of Customs of China, in 2018, the country imported $312 billion worth of IC products from overseas with the trade deficit reaching $227.4 billion. Although the deficit narrowed in 2019 to $202.5 billion, the imports still reached $304 billion. Thus, there is huge room for homegrown products to replace imported ones in the future.

Huawei’s case has highlighted the problem that China cannot meet the manufacturing requirement for chips mainly because of the lack of advanced machines and related equipment.

Wang Yanzhi, a staff member with ZTE based in Nanjing, Jiangsu Province in east China, told Beijing Review that machines for chip manufacturing have become a bottleneck for China’s chip industry since research and development (R&D) requires time and capital.


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