Sino-US chip talent war: sprint, or marathon?

Author |  Pre-rain observation

Source | Pre-rain Birth Observation, Blue Blood Study (Lanxueyanjiu)

In November last year, TSMC engineers flew to Arizona with more than 1,800 families and more than 1,800 people on six chartered flights. This large-scale talent transfer is an unprecedented talent flow in the history of Taiwan's semiconductor industry.

In order to revive the chip manufacturing industry, the United States has not hesitated to spend a lot of money to introduce global leaders such as TSMC and provide them with preferential conditions such as land, taxes, and electricity. However, the United States has found that to build an efficient chip factory, money and equipment are not enough, but also a large number of professionals, which is rare in the United States.

Just a month before TSMC engineers left for the United States, the United States issued a series of chip export control measures to China aimed at weakening China's ability to produce and even buy the highest-end chips. Gregory M. Smith of the Center for Strategic and International Studies in Washington, D.C. C. Allen characterized it as an act of war:

From 2022, there are two dates that will be remembered by history, the first being February 24, when Russia invaded Ukraine; The second is October 7.

Chips are the lifeblood of the modern economy, and we can't do without them for all kinds of electronics and systems such as mobile phones, toasters, cloud servers, and bank cards. Chips are also the driving force behind key technologies such as quantum computing and artificial intelligence that will change the future of humanity. The US chip blockade of China not only threatens China's scientific and technological innovation and national security, but also stimulates China's determination and motivation to independently develop and produce chips.

According to the "2023 Chinese mainland Integrated Circuit Industry Talent Supply and Demand Report" (pay attention to the "Talent Report" sent by "Rainfront Industry Observation" to obtain the report), in January ~ May this year, China's chip manufacturing investment soared compared with the same period last year, and the demand for technical talents, especially senior talents with long-term experience, surged. People and weapons constitute the decisive factor in war, advanced weapons can bring advantages in the short term, in the long run, talent is the most critical variable, and this law also applies to the Sino-US chip war. Under the control of the United States, the Netherlands and Japan, China is currently facing restrictions on the export of chip manufacturing equipment, however, talents in the field of chip manufacturing are more suitable to take root in the soil of East Asian culture. The green mountains can't be covered, after all, the east flows. From the United States to Japan to South Korea to Taiwan, and finally to Chinese mainland – the shift in the world's chip manufacturing centers is hard to stop.

01

Chinese mainland chip manufacturing investment skyrocketed 13 times

On August 7, wafer foundry leader Hua Hong Semiconductor was listed on the Science and Technology Innovation Board, with a total market value of 89.227 billion yuan based on the issue price, setting the largest A-share IPO this year.

Huahong Semiconductor, formerly known as Hua Hong NEC, the main body of the "909 Project", was established in 1996 with an investment of 10 billion yuan, which was the largest and most technologically advanced national project in the history of China's electronics industry at that time, carrying the dream of China's independent core manufacturing.

According to the "2023 Chinese mainland Integrated Circuit Industry Talent Supply and Demand Report", in January ~ May this year, there were about 163 investment events (excluding listed companies) in the field of integrated circuits, with an investment scale of more than 40 billion yuan. Among them, there were only 4 investment events in chip manufacturing, but the investment scale was as high as 26.3 billion yuan, 13.5 times that of the same period last year, which was mainly due to the strategic investment of about 26.13 billion yuan obtained by Hua Hong Semiconductor. This alarming data reflects the pressure of the US blockade, the Chinese government and enterprises continue to increase investment in independent chip research and development and production.

As early as a few years ago, in order to break external dependence and narrow the gap with the international advanced level, the Chinese government introduced a series of policies and measures to support and encourage the development of the integrated circuit industry. In August 2020, the State Council issued Several Policies to Promote the High-quality Development of the Integrated Circuit Industry and the Software Industry in the New Era, which provides policy support for the development of the semiconductor industry from multiple perspectives such as finance and taxation, investment and financing, IPO, research and development, import and export, talents, intellectual property rights, market applications, and international cooperation, and proposes that China's chip self-sufficiency rate should reach 70% by 2025.

In addition, the first and second phases of the National Integrated Circuit Industry Fund were established in 2014 and 2019 respectively, with a total scale of 138.7 billion yuan and 204.2 billion yuan, focusing on chip manufacturing and equipment materials, chip design, packaging and testing and other links of the industrial chain, supporting the backbone leading enterprises in the industry to become bigger and stronger. In recent years, the global semiconductor market has continued to grow, while China's chip imports have declined, revealing that a new chapter of domestic substitution has quietly opened. With the development and application of new technologies such as artificial intelligence, 5G, and the Internet of Things, the demand for chips is increasing. According to data from the World Bureau of Semiconductor Trade Statistics, the global semiconductor market size will reach $580.1 billion in 2022, an increase of 4.36% over the previous year; In 2023, the global semiconductor market is expected to grow by 4.6% to reach a market size of $662 billion.

As the world's largest chip consumer market, China's chip imports increased by 25.6% year-on-year in 2021, reaching a historical peak of US$439.7 billion, but then there was a continuous decline, with chip imports falling by 5% year-on-year in 2022 and a sharp decline of 17% in the first half of 2023. This phenomenon reflects the significant impact of export controls and domestic substitution, in addition to the decline in global consumption power. In order to narrow the gap with the international advanced level, China is increasing investment and research and development of advanced process chips. The level of technology in the global chip manufacturing field is mainly measured by the process node, that is, the size of the transistor on the chip. The smaller the process node, the more transistors there are, and the better the performance of the chip. At present, the world's most advanced process node is 3 nm, which is only mastered by a few manufacturers such as TSMC and Samsung. Not to be left behind, China has increased investment and research and development in chip manufacturing at advanced process nodes. SMIC began mass production of 14nm FinFET chips in the second half of 2019, and more advanced process development such as 12nm and 7nm can be carried out in an orderly manner. Hua Hong Semiconductor has also achieved mass production of 28nm advanced process.

02

The chip manufacturing industry is in dire need of long-term experience

For further development in the field of chip manufacturing, a major challenge is the shortage of talent, especially those with more than 10 years of experience. According to the "2023 Chinese mainland Integrated Circuit Industry Talent Supply and Demand Report", with the acceleration of the pace of domestic substitution, the demand for talents in manufacturing and equipment shows a rapid growth trend. Specifically, in 2022, the year-on-year growth rate of employees in the manufacturing and equipment sectors of mainland listed companies will reach 21.66% and 33.92% respectively; The year-on-year growth rate of technical personnel reached 123.89% and 52.87%. Compared with the growth of demand, the performance of the supply side is not optimistic. In 2022, the number of resumes delivered in the equipment link was 11,500, a year-on-year increase of 21.9%, which was slightly insufficient compared with the growth in demand, while the number of resumes delivered in the manufacturing link was 30,700, a year-on-year decrease of 3.51%, showing an obvious contradiction between supply and demand. The reason behind this is that the talent needs in manufacturing are different from other links, and it especially needs those with rich practical experience. According to the data of the Report, the demand for talents with more than 5 years of experience is relatively high, reaching 19.1%, and it is more noteworthy that the proportion of talent demand with more than 10 years of experience has increased from 4.35% in 2021 to 6.35%. This means that the chip manufacturing industry is increasingly hungry for long-term experience. And this thirst can not be satisfied overnight, because chip manufacturing is a highly complex, precise, integrated and innovative engineering activity, containing a large amount of know how tacit knowledge and capabilities, requiring years of practice accumulation and technical precipitation. To build a fab, capital is oxygen, the plant is the body, the equipment is the organ, the process is the soul, the yield is the blood, and mass production is life. Each of these parts represents the highest standards of human industry, and together they are inseparable integrated systems, just like an organic organism.

If you are not careful, you will lose all games;

A moment of delay, a full loss;

One step behind, all lose.

The only basis for testing whether the factory can be successfully put into operation is whether the team has a successful precedent. Yes, not necessarily successful. No, it will definitely not succeed. Chip manufacturing is an organizational activity that requires gapless collaboration. In the chip manufacturing process, every detail affects the whole body. From the initial plant construction, to wafer processing, oxidation, lithography, etching, thin film deposition and other manufacturing links, all are precise and tedious work, any link of mistakes, may lead to the failure of the entire chip manufacturing, the total yield is the top secret of a fab. This requires many years of practical experience, patient and careful engineering and technical personnel to ensure the yield and mass production of chip manufacturing.

In the eyes of many people, building a factory belongs to civil engineering and does not require a special professional threshold, which often leads to project failure. The Wuhan Hongxin project, which invested hundreds of billions of yuan, is in ruins, in addition to the broken chain of funds, there are also reasons why the plant is not passed, there are problems such as the misalignment of the central axis, insufficient emergency borrowed power reserves, and too low a high ceiling. A person familiar with chip manufacturing has surveyed Hongxin's factory on the spot and concluded, "The land is uneven, and the chip factory built will be scrapped in two years." And the Torch Group, the general contractor found by Hongxin, does not have any chip factory construction experience. Chip manufacturing is a knowledge-intensive R&D activity. Driven by Moore's Law, the chip process is always in a state of continuous progress, and continuous improvement and innovation of materials, equipment, processes, etc. are required to improve the yield rate, reduce costs, and make the performance of the chip more excellent. This requires highly educated talents with R&D spirit and ability to carry out cutting-edge theoretical exploration and experimental verification, and break through technical difficulties and bottlenecks. Chip manufacturing is also a complex systems engineering that collaborates cross-functionally. The manufacturer should explore the direction of process improvement with the design, and maintain a high degree of collaboration with equipment suppliers, material suppliers, etc. to ensure the smooth operation of the supply chain and the timely management of risks. This requires versatile senior executives with an international outlook and supply chain knowledge who have knowledge in multiple areas and can bring different professionals together. To complete such a task, chip manufacturing absorbs almost all science and engineering professionals such as microelectronics, materials, chemistry, machinery (precision instruments), mathematical physics, etc., most of the processes require a master's degree or above, require advanced theoretical knowledge to solve problems creatively, but also require strong hands-on ability and teamwork spirit, these qualities are often contradictory.

Therefore, no school can train talents that fully meet the needs of the chip manufacturing industry, and no other similar factories or industries can step into the high-end chip manufacturing industry. This dooms the source of chip manufacturing talents mainly concentrated in chip manufacturing enterprises.

Statistics find that the founders or core personnel of chip manufacturing enterprises in mainland China are all engineers and technicians, most of whom have doctoral degrees, mainly from two major sources:

First, foreign-funded chip manufacturing enterprises. For example, TSMC Zhang Zhongmou and SMIC Zhang Rujing are both from Texas Instruments, Yang Shining, CEO of Changjiang Storage, is from Intel, Chen Wei, founder of Yuexin Semiconductor, is from Singapore Chartered Semiconductor (later merged by GLOBALFOUNDRIES), Chen Wei, founder of Silige, is from Xinyuan Semiconductor (MPS), and Wang Ningguo, former CEO of Huahong Group, has worked in Applied Materials, the world's largest supplier of chip manufacturing equipment.

The second is the chip manufacturing enterprises spawned by major national strategic projects. For example, Xie Xiaoming, chairman of Yandongwei, is from Beijing Electron Tube Factory (the predecessor of BOE), which was once Asia's largest production base for electronic tubes (the predecessor of integrated circuits), built with the help of the former Soviet Union and the GDR. Chen Xiangdong, chairman of Silan Microelectronics, is from Huayue Microelectronics, the main body of the "531 Strategy", and Wang Guoping, the first general manager of China Resources Microelectronics, is from Huajing Group, the main body of the "908 Project".

Chip manufacturing entrepreneurs also show the phenomenon of aging, basically over 50 years old, in sharp contrast to the Internet cutting-edge, fully indicating that chip manufacturing is an industry that needs experience accumulation on a solid theoretical basis, can only be done step by step from low to high, there is no possibility of overtaking on curves, changing lanes, and cross-border car building. It is worth mentioning that the FinFET architecture, which has long dominated the world's advanced processes, is also a Chinese its inventor.

03

The global chip manufacturing center is in East Asia

Before Zhang Rujing founded SMIC, Chen Zhengyu founded Chinese mainland first pure wafer foundry, Huajing Shanghua Semiconductor. He is a veteran of Taiwan's semiconductor industry and a pioneer in the mainland semiconductor market. Chen Zhengyu has actively participated in the development planning of Taiwan's semiconductor industry, is a core team member of Taiwan's wafer foundry model and business development and promotion initiative, and has successively founded Huajing Shanghua since 1998 and led the restructuring of CR Shanghua, laying the foundation for the development of CR Microelectronics Group.

Asked why he can always grasp the development trend of chip manufacturing, Chen Zhengyu reviewed the history of semiconductor development, in 1970, Japan replaced the United States as an important player in the semiconductor market; In 1980, South Korea rose; In 1990, Taiwan took off. He pointed out the reasons behind this trajectory:

Depends on human resources.

Developed regions such as Europe and the United States usually move low-cost, low-value-added industries out, while focusing on high-end, high-value-added industries. But chip manufacturing, unlike labor-intensive industries such as textiles, is a capability-driven industrial shift.

Chip manufacturing requires a lot of technological innovation, meticulous work attitude and rigorous discipline, which are in line with the characteristics of East Asian culture that pay attention to rigor, pay attention to detail, be diligent and studious, and team spirit.

Through long-term technical learning and accumulation, East Asia has formed capabilities and advantages beyond Europe and the United States in the field of chip manufacturing. At present, Taiwan, China, has a market share of more than 60% in the global foundry market, and Intel, as the originator of the chip industry, integrates design, manufacturing and packaging and testing, and has hovered on the 14nm process for a long time, and still cannot achieve 3nm mass production. Since its establishment in 1987, TSMC has developed a unique operating model, including engineers must be on call to solve problems, upstream and downstream and close cooperation between surrounding manufacturers, which enables TSMC to occupy half of the global semiconductor market with high yield and one-stop service.

Experts in the semiconductor industry generally agree that no matter how advanced wafer foundry technology and R&D are, it ultimately comes down to manufacturing and factory management. When it comes to yield and manufacturing, the nature of discipline is inevitably involved. Because once the wafer comes online, it has to operate 24 hours a day, which is not just a matter of shifts, but also needs to be on call. In Hsinchu, Taiwan, technology companies, customers who have temporary needs or sudden operational problems must rush back to the company or factory immediately within the specified time. Such a way of working is unimaginable and unacceptable to Americans. However, it is impossible to change the cultural customs of the United States in the short term, so TSMC simply transfers people directly from Taiwan, which may be faster.

In addition, TSMC emphasizes teamwork, while education in the United States emphasizes individualism. This exposes the problem that many American engineers are extremely strong in theory and scholarship, but may not be so in practice. In contrast, TSMC's team of engineers works together, including not only engineers who research and develop new technologies, but also engineers and personnel in production, as well as engineers responsible for maintaining power supply and adjusting equipment. Older generations of Americans have long been reluctant to venture into manufacturing, and younger generations are less likely to choose to enter the most demanding semiconductor manufacturing. If these countries in Europe and the United States want to develop their own semiconductor manufacturing, they first need to overcome cultural barriers. Therefore, the shift of the global chip manufacturing center to East Asia is actually a reshaping of the role of East Asia in the global value chain, and also indicates the future direction of the global chip manufacturing industry.

04

Chinese mainland: The next chip manufacturing center?

As the birthplace and center of East Asian culture, Chinese mainland has the world's largest chip consumer market, and has also made great strides in chip design and manufacturing. With the Chinese mainland's policy support and investment in chip autonomy and control, the third transfer of global chip manufacturing centers is expected to be Chinese mainland and will have a greater and more lasting impact.

Ironically, the chip blockade imposed by the United States on China has become an important external factor that stimulates the acceleration of localization and substitution in China's chip industry. The New York Times recently published a long article "This is an act of war": decoding the US chip blockade of China" believes that the difficulty of China's realization of independent and controllable chips is no less than copying the entire human civilization, and then it is not without worry:

But if there is any country that can overcome such a challenge, it is probably China.

The New York Times article worries that if a large portion of China's $400 billion a year for chip imports is diverted domestically, its domestic chip companies may finally get the means and impetus to catch up. On July 28, TSMC President Wei Zhejia said at the completion and opening ceremony of the Hsinchu Global R&D Center that TSMC is determined to "stay in Taiwan." Almost at the same time, it was reported that TSMC's wafer fab in Arizona, USA, had to train local technicians due to the insufficient number of professionals who could skillfully install equipment, and mass production was postponed to 2025, a year later than originally scheduled.

For TSMC's investment in the United States, NVIDIA Huang Jenxun's comments hit the nail on the head:

The core and soul of TSMC are in Taiwan, and will not be changed by the establishment of the US factory.

Equipment and chips are like water, it is natural to follow the flow of the market, and artificial control is difficult to last. Culture is like a mountain, it is the foundation and soul of chip manufacturing, and it is not easy to migrate.

"These controls cannot contain China once and for all. Even in the best of circumstances, they are just a delaying tactic. The New York Times article said that for China, the future of chips is a major matter related to the national fortune. And according to Thea Rozman Kendler, who is responsible for export management at the US Bureau of Industry and Security:

It may also be about our survival.

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