Behind the increase in the export ban of the United States and Japan, what is the domestic replacement rate of core components?
Recently, Japan's Ministry of Economy, Trade and Industry officially announced amendments to the Foreign Exchange Law, adding 23 categories such as advanced chip manufacturing equipment to the export control list. The amendment was announced on March 31, finalized after a month of public comment, and officially implemented on July 23.
It is understood that in the case of the US export ban layer by layer, domestic wafer fabs and semiconductor equipment manufacturers have sought to "de-beautify" the supply chain, and increase the procurement of upstream equipment, parts and raw materials in Japan and South Korea. After the introduction of the above-mentioned Japanese amendments, the industry realized that importing Japanese equipment carries huge risks, or it may need to continue to adjust the supply chain. In addition, the amendments are relatively broad and vague in the category of newly controlled equipment, and the specific impact is still unknown.
Due to the above factors, the industry is not only worried that domestic fabs will not be able to purchase semiconductor equipment subject to export controls, but also worried that domestic semiconductor equipment manufacturers will encounter obstacles in purchasing Japanese imported parts.
Export restrictions on semiconductors to China continue to escalate
In fact, since the United States issued new export control rules for China's semiconductor industry in October last year, it has continuously pressured Japan, South Korea and Europe to join the camp of blockade of China's semiconductor technology.
In March this year, the Netherlands and Japan officially responded to the United States, and the Dutch government indicated in a letter to Congress that it would introduce stricter semiconductor export control measures. Subsequently, on March 31, the Japanese government also issued a consultation draft on amending the provincial order on export control rules, including 23 types of high-end semiconductor manufacturing equipment into export control.
Judging from the export control policy officially announced on May 23, it is basically the same as the previously announced version, and no further adjustments have been made to the scope of restrictions. The newly added categories of export control equipment include: 3 cleaning equipment, 11 thin film deposition equipment, 1 heat treatment equipment, 4 lithography equipment, 3 etching equipment, and 1 testing equipment.
In the Netherlands, Dutch Minister of Economy Micky Adriaanssens said in an interview with the German media "Frankfurter Allgemeine Zeitung" that the authorities are formulating relevant regulations, and ASML, a leading lithography machine company, should soon receive clear guidance on what products it can provide to China; It is expected that the Dutch authorities will be able to issue the relevant export licences in July 2023.
It can be seen from the above that the above-mentioned export restrictions between the Netherlands and Japan will be implemented in July this year. In terms of specific impacts, although the Japanese government stressed that the impact (of export controls) is limited, Jiwei asked a number of industry insiders to learn that because the above regulations are not clear and whether an export license can be obtained, the industry is still assessing its impact.
What is clear is that the above export restrictions to China may only be the beginning, and the United States will encourage more allies to adopt more comprehensive and severe sanctions to hinder the development of China's semiconductor industry. With the escalation of export restrictions, the difficulty of China's semiconductor industry to obtain technology and products from overseas is increasing.
The dependence on imports of parts and components is a concern
Since the above-mentioned new export control regulations mainly target advanced semiconductor technologies, domestic fabs have adjusted their development strategies and shifted their attention to mature processes when dealing with US export controls.
In terms of mature processes, Ye Tianchun, chairman of the Integrated Circuit Branch of the China Semiconductor Industry Association, once said that domestic equipment and materials in 28nm have initially established supply capacity. Based on this, the inability to import advanced process equipment from Japan may have limited impact on domestic semiconductor fabs, but it has sounded the alarm for the industry or further accelerated the process of domestic substitution of semiconductor equipment.
In response to investors' question "Do Japan's export restrictions on semiconductor equipment have a significant impact on your company?" Will there be any hindrance to the import of important parts and components from Japan? Can't even get it? On this issue, Zhichun Technology also admitted that among Japan's restrictions on semiconductor equipment, the restrictions on wet cleaning equipment have no impact on the company, and may even accelerate the pace of domestic downstream manufacturers purchasing localized equipment, and restrictions on other equipment other than wet cleaning equipment may have an indirect impact on the company's business, which is still uncertain. Some parts of the company's equipment are imported from Japan and South Korea, and the company has found and cultivated alternative domestic parts suppliers in China, and the proportion of domestic secondary supply will be further increased this year.
Compared with semiconductor equipment that has made breakthroughs, the domestic development in the field of components is weaker. Since the production of semiconductor equipment has very strict requirements for the quality of parts, Japan, Europe and the United States are in an absolute dominant position in the field of semiconductor equipment and parts. At present, the world's top 20 integrated circuit component manufacturers together occupy nearly 60% of the market share, and among the top 20 manufacturers, the United States and Japan each account for 8, leaving Germany, the United Kingdom, Switzerland and the Netherlands one each. Therefore, the dependence on imports of core components is a common situation for domestic semiconductor equipment enterprises.
"Due to the low localization rate of electrostatic chuck, manipulator, motion and control system parts, the company currently mainly purchases from parts suppliers such as Japan and the United States." According to a domestic equipment manufacturer, taking the electrostatic chuck market as an example, the leading enterprises include the United States AMAT, the United States LAM, Japan Shinko Electric, Japan TOTO, Japan NTK and other international giants, the above enterprises have long controlled the supply chain of international electrostatic chuck products, until recent years domestic products have slowly made breakthroughs.
Li Chaobo, Secretary-General of the China Integrated Circuit Components Innovation Alliance, also said that with the support of the "02 Special Project" of the Ministry of Science and Technology, the domestic parts and components industry is also gradually emerging, forming a certain degree of support for the stability of the supply chain and independent innovation; However, the gap is still huge, according to incomplete statistics, about 50% of core components have no domestic alternatives.
Specifically, among all kinds of semiconductor parts, only the self-sufficiency rate of metal cavities, filters, silicon parts and quartz parts exceeds 10%, the self-sufficiency rate of heaters and vacuum dry pumps is between 5% and 10%, the self-sufficiency rate of mass flow meters, RF power supplies and manipulators is between 1% and 5%, and the self-sufficiency rate of parts including vacuum valves, vacuum gauges, ESC, and sealing rings is less than 1%.
In addition, the author learned from the industry that in response to the export restrictions of the United States on parts, some leading domestic semiconductor equipment manufacturers have reduced the procurement of American parts in 2022, actively promoted the localization of the supply chain, but also increased the procurement of parts in Japan, South Korea, Europe and other places, and some semiconductor manufacturers represented by Xinyuan Micro even deliberately established Japanese subsidiaries so that the company can find more reliable supply chain resources.
At present, the Japanese law does not explicitly restrict the export of parts and components, but this does not mean that there is no threat, and relying on imports is not a long-term solution. Whether it is to cope with the further escalation of trade restrictions in the United States, Japan and other countries, or from the perspective of improving the company's cost-effectiveness, domestic semiconductor equipment manufacturers need to take precautions in advance and accelerate the localization of parts.
As Professor Wei Shaojun mentioned, the global semiconductor supply chain is undergoing great changes, the United States and the West are trying to exclude China from the supply chain, and it is urgent to build a strong semiconductor local supply chain while striving to maintain the integrity of the current semiconductor global supply chain.