by Jean-François Tremblay, C&EN Hong Kong
China faces multiple hurdles in developing a semiconductor industry able to produce its own advanced materials.
Foreign firms are currently the main producers of advanced semiconductors, materials, and components in China.
Shown here is an Intel facility in the U.S.
The ability to remove particles no more than 1 nm in size from a solution is one of the technologies that the semiconductor industry will soon require for making next-generation chips. It’s a technology that China is coming close to mastering.
Yingmin Zhang, CEO of Hangzhou Cobetter Filtration Equipment, told a recent conference that his firm is already selling systems able to filter 2-nm particles and that 1 nm is within reach. In addition to its Chinese customers, the company has about 200 customers in Japan, where it is able to meet semiconductor industry standards, he noted. “Our customers don’t only buy from us just because we’re cheaper,” he said.
China will need many more companies like Cobetter if it is to meet the ambitious goals it has set for its semiconductor industry. Although it is now completely dependent on imports for cutting-edge chips and lacks the equipment and materials required to make them, China hopes to soon develop a domestic network of suppliers that can meet about half the sourcing requirements of its rapidly growing industry.
It won’t be easy. For one, China will have to contend with U.S. export controls that limit its ability to import the most advanced instruments and materials. The country’s young semiconductor materials sector is also at a technological disadvantage compared with industries in Japan, the U.S., and Europe that have developed their know-how over decades. And meeting the stringent demands of the semiconductor industry doesn’t come naturally to most Chinese producers of materials and components.
“Chinese suppliers can produce a lot of different things, but they struggle when it involves the extreme quality and reliability that is required in the semiconductor industry,” said John West, managing director of European activities for the semiconductor market research firm VLSI Research. He was another speaker at the conference, held in Ningbo, China. The event was cohosted by China’s Integrated Circuit Materials & Components Industry Technology Innovative Alliance (ICMTIA) and the U.S. electronic materials consulting firm Techcet.
China’s goals for its semiconductor industry are quite lofty. For example, it hopes to go from making equipment to produce chips in the 45-to-65-nm range two years ago to production of the most advanced chips—currently with 10-nm lines—within a few years. China also hopes to master the technology for producing wafer-grade polysilicon; currently, only a few Chinese chip producers are willing to use locally made silicon.
Despite its heavy reliance on foreign suppliers, China is developing its semiconductor sector at a brisk pace. Haibo Lei, president of the chip maker Shanghai Huali Microelectronics, noted in Ningbo that 12 semiconductor factories are operating in the country, and 18 more are under construction.
Most of the semiconductor producers operating in China today are foreign giants such as Intel, Samsung, and Taiwan Semiconductor Manufacturing. But local challengers like Huali are investing aggressively. Huali, Lei noted, is building a 64,000-m2 facility that he said will be the world’s largest single-floor chip factory.
Developing the industry is a priority of the national government. Earlier this year, the state-run China Integrated Circuit Industry Investment Fund started collecting over $30 billion from other arms of the government to invest in local chip designers and manufacturers and in companies supplying materials, components, and instruments to the semiconductor industry. Because of its relatively small size, China’s young semiconductor industry needs easy money to have a fighting chance.
“China’s chip industry only invests one-twentieth or even one-thirtieth the amount that major multinationals put into R&D,” said Zhiyao Yin, CEO of AMEC, a Chinese producer of semiconductor-manufacturing equipment. “The Chinese industry is smaller, so reinvesting the profits won’t be enough.” He advocated low-interest loans for R&D as an essential component of developing China’s industry.
China’s semiconductor industry is still a long way from its goal of relying on local suppliers for half its components and materials, acknowledged Ying Shi, secretary general of ICMTIA, but Chinese companies are making some noteworthy progress.
Intellectual property (IP) protection, an essential driver of corporate innovation, has improved in recent years, she noted, leading to an increase in the number of patents filed by companies in the semiconductor sector. In chemical-mechanical planarization, the process of smoothing the circuitry on a silicon wafer, China has gone from completely relying on foreign suppliers of polishing slurries and pads to enjoying a 30% share of the domestic market, she noted.
The Chinese industry is also making progress in the production of silicon, said Xin Tian, general manager of Jiangsu Xinhua Semiconductor Material Technology. Currently, Chinese producers supply only about 2% of the domestic industry. Purer silicon from abroad is required to meet most of China’s needs. But he is confident that quality levels in China will improve soon with the help of government support and the rapid growth of Chinese demand.
And China has significantly improved its ability to produce the specialty gases the electronics industry requires, said Lupin Wang, vice president of Jiangsu Nata Opto-Electronic Material. While China imported all these gases a few years ago, Chinese companies can already supply half of local needs. The industry does remain dependent on foreign-made valves that are critical to the storage and safe use of electronic gases, which tend to be hazardous, Tian said.
Despite the progress they are making, Chinese suppliers are able to meet the requirements of only the low end of the market, according to ICMTIA’s Shi. To improve their technological proficiency, she said, local companies should set up joint ventures or alliances with foreign partners in order to learn from them. “We need the involvement of foreign companies in the development of our local supply chain,” she urged.
It would be best if the foreign firms were not from the U.S., however. Lita Shon-Roy, president of Techcet, noted that the trade conflict between the U.S. and China is making life difficult for companies in both countries. For the past few months, Chinese suppliers of semiconductor materials have had a 10% tax levied on their exports to the U.S. on basic but essential materials like titanium chlorides, germanium oxides, and gallium and hafnium powders. In retaliation, China has imposed trade sanctions on U.S. products. Suppliers from South Korea, Japan, Taiwan, and elsewhere are enjoying new opportunities in China’s semiconductor industry as a result, she said.
International cooperation would, however, be of limited help to Chinese firms in overcoming U.S. technology export controls. VLSI’s West noted that the restrictions prevent the export to China of U.S. components and materials that are essential to producing the latest generations of chips. “Currently, that would be for anything 10 nm or below,” he said, referring to the width of the circuit lines on today’s most advanced chips. Top players like Intel and Samsung are already at work developing chips with 7-nm or even smaller lines.
Export controls affect critical components and subsystems, like mass flow controllers, vacuum pumps, lenses, and lasers, that the semiconductor industry cannot do without, West added. U.S. export controls can prevent European-made semiconductor-manufacturing tools from being sold to China because many contain parts that are made only in the U.S., he noted. Altogether, critical components and subsystems are an $18 billion market that is hard for China to enter because of the highly specialized industry know-how involved, West said.
“These companies depend on a small number of experienced people who know the tricks in manufacturing the devices,” West said. “Most of the actual IP is not written anywhere.” Chinese companies will be hard pressed to convince these key people to move to China, even after they retire, West expects.
Owing to the complexity of manufacturing integrated circuits, the supply chain for materials, tools, and components is long and multidirectional, several speakers at the Ningbo event noted. While China may not be able to produce the most advanced chip-fabrication tools, it is a critical supplier of materials like rare-earth metals, essential to many precision devices, and tungsten, a metal that is increasingly supplanting copper as the interconnect in chips.
Despite the risk that some Chinese firms might win market share from Western ones, the industry as a whole would be better off without trade restrictions or technology controls, West said. The cost of R&D in the semiconductor industry is high. Allowing China to freely participate in the market would help spread the R&D investment over a larger base of chip manufacturers, West noted.
And even without trade restrictions, China still faces many hurdles to becoming a viable producer of high-end chips and the tools and materials needed to make them. Without the ability to master the high-end market on its own, China will remain a major importer of materials and components for many years to come.
Clink here: https://cen.acs.org/materials/electronic-materials/Lack-skills-materials-vex-Chinese/96/i47