What did the Dutch "New Year's gift" bring to Chinese semiconductors?
At the beginning of the new year, Dutch lithography giant ASML issued a statement on its official website, saying that the export licenses of the company's NXT:2050i and NXT:2100i lithography systems have been partially revoked by the Dutch government, affecting a small number of Chinese customers.
This is the result of the Dutch government's export control measures against China taking full effect from January 1 under the intense pressure of the United States.
This means that ASML will not be able to sell its advanced lithography equipment, which is a key tool for making chips, to China. This is undoubtedly a heavy blow to China's semiconductor industry.
So, what impact does this "New Year's gift" from the Netherlands have on China's semiconductors, and how will China respond to this challenge?
1. The background and motivation of the Dutch ban on China
The Dutch ban on China was not a momentary decision, but the result of long-term pressure from the United States. The United States has long viewed China as its greatest strategic competitor, especially in the field of science and technology, and fears that China's rise could threaten its global leadership.
Therefore, the United States has taken a series of measures to try to curb China's technological development, the most important of which is the blockade of Chinese chips. Chips are the core of modern technology, and almost all electronic products need chips.
The lithography machine is the key equipment for manufacturing chips, and without advanced lithography machines, it is impossible to produce advanced chips. ASML is the world's hegemon in lithography machines, and its products account for more than 80% of the global market.
As a result, the U.S. has been trying to prevent ASML from selling its advanced lithography equipment to China in order to weaken China's chip-making capacity.
U.S. pressure on ASML began in 2019 when the Trump administration pushed the Dutch government to ban the sale of ASML's top-of-the-line extreme ultraviolet lithography (EUV) equipment, which can make advanced chips below 7 nanometers, to China.
Last year, under the impetus of the Biden administration, the Dutch government further strengthened export controls to China, restricting ASML from providing advanced lithography equipment to China, including deep ultraviolet lithography equipment (DUV), which can make mid-to-high-end chips from 14nm to 7nm, from January 1.
The U.S. aims to permanently exclude China from the global high-end chip supply chain, forcing China to rely on the U.S. and its allies for chip supplies, thereby controlling China's technological development.
Why did the Dutch government succumb to US pressure?
On the one hand, the Netherlands is an important ally of the United States, with which it has deep political, economic, and security relations, and is reluctant to enter into conflict with the United States.
On the other hand, the Netherlands is also a member of the European Union and is bound by EU laws and rules and cannot violate EU export control policies at will.
The European Union also amended its export control regulations last year to include human rights, security and diplomatic considerations, making EU member states more cautious when exporting sensitive technology to China.
In addition, the Netherlands also has its own interests, ASML is a national treasure of the Netherlands, and its products not only contribute greatly to the Dutch economy, but also are vital to the national security of the Netherlands.
The Netherlands did not want ASML's technology to fall into the hands of potential competitors or hostile forces to the detriment of its own interests.
2. The impact and challenges of the Dutch ban on China
The Dutch ban on China is undoubtedly a heavy blow to China's semiconductor industry. China is ASML's third largest market in the world, after Taiwan and South Korea.
In the third quarter of 2023, China became its largest export market, accounting for 46% of ASML's total sales.
Chinese chipmakers, such as SMIC, Huawei HiSilicon, Unisplendour, etc., are important customers of ASML and rely on ASML's lithography equipment to produce chips.
Due to the implementation of the Dutch ban on China, Chinese chipmakers will not be able to obtain ASML's advanced lithography equipment, which will seriously affect the production and research and development of their chips.
As a result, the gap in chip technology has further widened, unable to meet the domestic demand for chips, and unable to compete with the international market.
The challenges posed by the Dutch ban on China's semiconductor industry are as follows:
First, China's chipmakers will face supply chain disruptions and instability.
Unable to obtain advanced lithography equipment from ASML, chipmakers in China will have to find alternative suppliers or use existing equipment to produce chips.
However, other suppliers, such as Japan's Nikon and Canon, have far less technical and production capacity than ASML to meet the needs of Chinese chipmakers.
The use of existing equipment to produce chips will also face the problems of aging, maintenance and renewal of equipment, and the quality and efficiency of chips cannot be guaranteed.
In addition, due to the U.S. blockade of chips on China, it is also difficult for Chinese chipmakers to obtain raw materials, components and software for chips from other countries or regions, which will also increase the cost and risk of their chip production.
Second, China's chipmakers will face backwardness and lack of technology.
Chipmakers in China will not be able to produce advanced chips below 7 nanometers due to the lack of access to advanced lithography equipment from ASML.
This will lead to a further widening gap in chip technology, unable to meet the domestic demand for high-end chips, and unable to compete with the international market.
At present, the highest level of technology of Chinese chipmakers is 14nm, and only SMIC can reach it, while other chipmakers are still stuck at 28nm or lower.
Internationally, chip manufacturers such as TSMC and Samsung have achieved mass production of 5nm, and are even developing chips of 3nm or lower.
Such a technological gap will make China's chip manufacturers unable to compete with the international market in terms of performance, power consumption, and cost, and will also affect the development of China's chip design and application.
Finally, China's chipmakers will face shrinking and losing the market.
Without access to advanced lithography equipment from ASML, Chinese chipmakers will not be able to provide sufficient chip supply, which will lead to a decline in their share of the domestic and international markets, or even be replaced by other chipmakers.
According to statistics, China's chipmakers had a global market share of 5.9% in the third quarter of 2023, down 0.4% from the previous quarter.
In the domestic market, China's chipmakers are also facing competition from chipmakers such as TSMC and Samsung, which not only have advanced technology, but also have stable supply chains that can meet domestic chip demand.
As a result, chipmakers in China will face shrinking and losing the market, which will affect their revenues and profits, as well as their future investment and development.
3. China's response strategy and outlook
In the face of the impact and challenges brought about by the Dutch ban on China, China did not give up, but adopted a series of coping strategies, trying to break through the chip blockade of the United States and realize the independence and controllability of chips. China's response strategy is mainly based on the following aspects:
First of all, China has increased policy support and investment in the chip industry.
China regards the chip industry as a national strategy and has formulated a series of policies and plans, such as the "National Integrated Circuit Industry Development Promotion Outline", "National Integrated Circuit Industry Investment Fund", "National Science and Technology Major Project", etc., aiming to improve the overall level and competitiveness of the chip industry.
It is estimated that China's investment in the chip industry will reach $50 billion in 2023, the highest in the world.
These investments are mainly used to build chip manufacturing plants, introduce and train chip talents, research and development and innovation chip technology, etc., in order to narrow the gap with the international market and improve the self-sufficiency rate of chips.
Second, China has strengthened international cooperation and exchanges in the chip industry.
China recognizes that the chip industry is a global industry that requires the joint participation and contribution of all countries, and cannot develop in isolation.
Therefore, China actively seeks cooperation and exchanges with other countries and regions, such as the European Union, Japan, South Korea, Southeast Asia, etc., in order to break the chip blockade of the United States, expand the supply channels of chips, and obtain chip technology and resources.
For example, China and the EU have extensive cooperation in the chip industry, involving not only ASML's lithography equipment, but also other chip equipment and materials.
Such as Bessel in the Netherlands, Siemens in Germany, Soitec in France, etc.
The cooperation between China and the EU is not only conducive to the development of China's chip industry, but also to the prosperity of the EU's chip industry.
Finally, China has accelerated its independent R&D and innovation in the chip industry.
China understands that in order to achieve independent and controllable chips, the most fundamental thing is to rely on its own strength, break through the core technology of chips, and form its own chip brands and standards.
Therefore, China has accelerated its independent research and development and innovation in the chip industry, and has continuously launched its own chip products and solutions, in order to improve the performance and efficiency of chips, meet domestic chip demand, and compete with the international market.
For example, China's chip design companies, such as Huawei HiSilicon, UNISOC and MediaTek, have launched their own chip products, such as Kirin, Huben, Dimensity, etc.
These chip products are mainly used in smart phones, Internet of Things, artificial intelligence and other fields, and have been recognized and welcomed at home and abroad.
China's chip manufacturing companies, such as SMIC, Yangtze River Storage, Huawei and others, are also trying to improve their chip manufacturing capabilities, trying to break through the R&D and production of advanced chips below 7 nanometers, in order to narrow the gap with the international market and improve the self-sufficiency rate of chips.
Conclusion: The Dutch ban on China is both a crisis and an opportunity
The Dutch ban on China has brought great impact and challenges to China's semiconductor industry, but it has also stimulated China's semiconductor industry's response ability and innovation momentum.
After a difficult period, China's semiconductor industry has begun to gradually recover and develop, showing strong resilience and potential.
China's semiconductor industry still has a long way to go, and it will take more effort and time to achieve independent and controllable chips, but China's semiconductor industry has taken an important step and laid a solid foundation for future development.
The Dutch ban on China is a crisis and an opportunity, and China's semiconductor industry will continue to grow and expand in this crisis and opportunity, making contributions to China's scientific and technological development and national rise