Facing US sanctions, Chinese semiconductor industry underwent a strategical shift. Instead of entering a race of ever smaller manufacturing nodes with the likes of TSMC and Samsung, leading Chinese semiconductor manufacturer SMIC has opted for consolidating its position on the 28/14nm nodes.
As Chinese industry experts pointed out, the strategy prioritized survival than development. As the Biden administration continues the sanctions against SMIC and 58 other Chinese companies, citing their ties to China’s defense sector, SMIC’s hope to move beyond 14nm has been called into question again.
SMIC – the spearhead that is stuck
In Q4 of 2019, SMIC’s 14nm process entered production for the first time, and by the end of 2020 it successfully achieved the production capacity of 15,000 wafers per month. Huawei’s Kirin 710A processor, for example, used SMIC’s 14nm process.
In Q1 of 2021, the combination of 14nm and 28nm process accounted for 6.9% of SMIC’s revenues. Recently SMIC even claimed that its yield on 14nm had almost caught up with that of TSMC, reaching 95%, but it raised doubts among industry observers. Last year, SMIC co-CEO Mong-Song Liang also revealed in his resignation letter that its 7nm development had been completed and would enter risk production in 2021. However, there has been no further update from SMIC regarding this development.
Previously, SMIC’s N+1 process had been rumored to be an equivalent of 7nm, but later a SMIC official clarified that it was only an improvement of its 14nm process, representing a performance improvement of 20%, a power consumption reduction of 57% and a SOC area reduction of 55%.
Owing to SMIC’s difficulties with obtaining ASML’s EUV lithography machines, its road to move further down manufacturing nodes is full of challenges. Wuhan Hongxing Semiconductor, the only Chinese semiconductor company to have successfully obtained ASML’s EUV machine, declared bankruptcy this year and fell apart. The said EUV machine has been under a bank’s custody.
A strategical shift to strengthen the foundation
The predicament, combined with the high demand of mature manufacturing nodes, has gradually driven Chinese semiconductor policy to focus on reaching economy of scale at mature nodes while consolidating its expertise on them, before moving further along Moore’s Law.
Chinese industry experts have come to the same recommendation as well. According to an expert from China Electronics Information Industry Development Academy, the 28nm node has already reached overcapacity, while nodes below 10nm are the domain of top players like TSMC, Intel and Samsung. 14nm, caught in between, will be the mainstream production nodes for mid-to-high end electronics.
This overall shift in strategy also embodies an industry-wide recognition that a long-term, systematic effort is required to strengthen China’s semiconductor foundation. As Wu Hanming, the vice-president of SMIC’s R&D department, remarked: the goal of the Chinese semiconductor industry should be ecosystem-building, and the current focus should be the 55nm node which China can independently manufacture without foreign equipment.
SMIC’s Q1 report this year, for example, reveals that 32.8% of its revenues have come from its 55/65 process nodes, while 44% have come from nodes at 90nm and above.
Wu further remarked that it would be unrealistic for the entire industry to plunge headlong into the 7nm node as well as the high-end EUV machine without polishing up the basics. In fact, he called into question the whole-of-nation approach to domestically produce high-end lithography machines, given its heavy dependence on components that are only specialized in certain countries. In short, it needs a global supply chain.
The view reflects the industry’s gradual realization that advanced manufacturing nodes require cross-sector collaboration and lengthy development cycles to circumvent the proprietary know-hows that have been in foreign hands – a key factor that has been impeding Chinese’s chip autonomy. Ultimately, breakthroughs cannot be achieved via sheer capital, it also requires talents and time.