Exclusive interview with Wei Shaojun, Director of the Institute of Microelectronics at Tsinghua University: It’s extremely difficult for the global semiconductor industry to decouple.

    6 On the 5th, if the U.S.'s newly revised “Foreign Direct Product Rule” targeting Huawei is formally implemented, it will inevitably deal a blow to the global semiconductor supply chain.

Wei Shaojun, chief technical advisor of the National Key R&D Program on Core Technologies and Director of the Institute of Microelectronics at Tsinghua University, said in an exclusive interview with a reporter from China News Service that China should start planning early to prepare for potential supply-chain adjustments in the global semiconductor industry. He believes that China’s semiconductor industry will take on a very different appearance over the next three to five years.

According to the U.S. Foreign Direct Product Rule, as newly amended on May 15, chip products manufactured by Huawei and all its affiliates using equipment listed on the U.S. Commerce Control List—regardless of whether such equipment is produced outside the U.S.—will be subject to these regulations. This means that chip foundries such as TSMC, SMIC, and HuaHong Semiconductor will no longer be able to manufacture chips for Huawei.

Wei Shaojun believes that the United States, by leveraging state power to curb the development of foreign companies, simply cannot tolerate foreign enterprises. Developing it further constitutes technological bullying, which is opposed not only by China but also by industry leaders in the United States and other regions and countries around the world.

Wei Shaojun believes that the U.S. restrictions imposed on Huawei are currently still in a grace period, but once fully implemented, they will deal a severe blow to global supply chains. Restricting the sale of chip products that rely on U.S. technology to Huawei would effectively deprive numerous participants throughout the value chain of their right to reap benefits from Huawei, inevitably sparking widespread outrage.

However, “tech decoupling” between China and the U.S. won’t be that easy. Wei Shaojun pointed out that the semiconductor industry is the most thoroughly globalized sector. The U.S. is the world’s largest exporter of semiconductor products, Taiwan, China, is home to the world’s largest semiconductor foundry industry, and mainland China is the world’s largest chip market. Meanwhile, the semiconductor industries in Europe, Japan, and South Korea each have their own distinctive features and play crucial roles in the global supply chain. “Once the global industrial ecosystem balance is disrupted, there will be no winners between China and the U.S., and it will take a very long time to reestablish this balance.”

He also believes that the semiconductor industry is inextricably linked to both technological advancement and industrial development. If technological decoupling were to occur, it would inevitably lead to industrial and economic decoupling—a scenario that neither China nor the United States could afford. Indeed, the cost for the U.S. would be even greater. Even if the U.S. government were determined to proceed, U.S. companies might not necessarily be equally resolute. And even if U.S. companies did make up their minds, it would still take decades—and at a cost of tens of trillions of dollars.

    2020 The pandemic this year has also impacted the semiconductor industry, leading to shifts in the supply chain. Wei Shaojun believes that, domestically in China, thanks to the global semiconductor market’s recovery starting in the fourth quarter of last year, China saw a surge in orders and full utilization of production capacity in the first quarter, so the industry’s impact has been relatively limited.

In the long term, the pandemic has had a profound impact on the semiconductor industry. Wei Shaojun said that due to the pandemic, international supply chains have been disrupted. With restrictions on supply, some semiconductors previously sourced externally will now be supplied locally, thereby boosting the expansion of China’s domestic semiconductor industry. However, in 2020, the growth rate of China’s semiconductor industry is expected to slow down, with forecasts pointing to single-digit growth. In the coming years, the global semiconductor supply chain is unlikely to undergo a fundamental restructuring, though adjustments are inevitable.

Wei Shaojun believes that after decades of development, China’s semiconductor industry has made significant progress. However, insufficient R&D investment remains a clear constraint. “Since 2008, the total annual R&D expenditure of China’s chip industry has been less than one-fifth of that spent by Intel alone—a fact that deserves our serious attention.”

In the field of chip design, Chinese companies already possess considerable capabilities and have developed several world-class enterprises. In the equipment sector, although there are still some shortcomings, the gap in other equipment—aside from the most advanced models—is steadily narrowing. Wei Shaojun said, “The situation in chip manufacturing will look very different in three to five years.”

Wei Shaojun believes that improving the semiconductor industry ecosystem is a crucial task when it comes to addressing existing shortcomings. As for future changes in the global supply chain, we need to prepare well in advance by increasing investment and adopting a market-oriented approach to resource allocation.

He believes that localization is not the ultimate goal of semiconductor industry development. “No country can achieve localization in every single link of the semiconductor value chain, nor is it necessary. What’s more important is ensuring supply-chain security and avoiding being ‘choked’ by others.”

Wei Shaojun believes that the development of China’s semiconductor industry must still be driven by open cooperation rather than isolation. Only through openness can we achieve a larger market, attract more outstanding talent, and gain access to more advanced technologies. In the future, China’s semiconductor industry will undoubtedly embrace globalized development—producing wherever costs are lowest.