Technology and Materials—Concerns Over the Development of China’s Chip Manufacturing

China's semiconductor industry faces numerous obstacles in the advanced materials production process.

In China, foreign companies remain the primary producers of advanced semiconductors, materials, and components. The photo shows Intel’s factory in the United States.

The technology for removing particles no larger than 1 nanometer from solutions will soon become one of the essential technologies for manufacturing next-generation chips in the semiconductor industry. China will also master this technology. At a recent conference, Zhang Yingmin, President of Hangzhou Cobetter Filtration Equipment Co., Ltd., stated that Cobetter is already capable of selling systems that can filter particles as small as 2 nanometers and can even achieve filtration of 1-nanometer particles. Zhang emphasized that, in addition to Chinese customers, Cobetter has around 200 Japanese clients who have now met the entry standards for the semiconductor industry. He said, “We’re definitely not just competing on price.” For China to achieve greater development goals in the semiconductor industry, it will need more companies like Cobetter. Although China currently still relies entirely on imports for advanced chips and lacks the equipment and materials necessary for chip manufacturing, China remains committed to quickly establishing its own supplier chain to meet roughly half of the industry’s rapidly growing procurement needs.

Of course, this is no easy task. First, China has to contend with U.S. export controls, which will also limit its ability to import cutting-edge instruments and materials. Compared with the proprietary technology industries that Japan, the U.S., and Europe have developed over decades, China’s nascent semiconductor materials industry clearly still lags behind in terms of technological capability. For most Chinese material and component manufacturers, meeting the stringent entry requirements of the semiconductor industry is far from straightforward.

“Chinese suppliers can produce a wide variety of products, but they often fall short when it comes to meeting the semiconductor industry’s stringent requirements for quality and reliability,” said John West, Managing Director for Europe at VLSI Research, a semiconductor market research firm, during his speech at this conference held in Ningbo, China. This academic conference was co-organized by the China Integrated Circuit Materials and Components Industry Technology Innovation Strategic Alliance (ICMTIA) and TECHCET, a U.S.-based electronic materials consulting firm.

China has set ambitious goals for the development of its semiconductor industry. For example, starting two years ago with the manufacture of chips in the 45-65 nanometer range, China now aims to achieve, within a few years, the capability to produce the most advanced chips—currently at the 10-nanometer production line. China also aspires to master the technology for producing polysilicon at the wafer level; at present, only a handful of Chinese chip manufacturers are willing to use locally manufactured silicon wafers.

Despite its heavy reliance on foreign suppliers, China’s semiconductor industry is rapidly developing. At this Ningbo conference, Lei Haibo, President of Shanghai Huali Microelectronics, a Chinese chip manufacturer, pointed out that China currently has 12 operational semiconductor factories, with another 18 under construction.

Currently, most of the semiconductor manufacturers operating in China are foreign giants such as Intel, Samsung, and TSMC. However, local up-and-coming companies like HuaLi Microelectronics are also making active investments. Lei stated that HuaLi is building a 64,000-square-meter factory, which he said will be the world’s largest single-story chip factory.

Developing the semiconductor industry is a top priority for the Chinese government. Earlier this year, the state-owned China Integrated Circuit Industry Investment Fund began raising over 30 billion U.S. dollars from other government departments to invest in domestic chip designers and manufacturers, as well as to provide financial support to companies that supply materials, components, and equipment to the semiconductor industry. Given its relatively small industry size, China’s young semiconductor sector needs a favorable funding environment to help it compete effectively in the fiercely competitive market.

“R&D investment by Chinese chip manufacturers is only one-twentieth or even one-thirtieth of that made by large multinational corporations. Given the relatively small scale of China’s industry, simply reinvesting profits is not enough,” said Yin Zhiyao, Chairman of Zhongwei Semiconductor Equipment Co., Ltd., a Chinese company specializing in semiconductor manufacturing equipment. At the same time, Mr. Yin advocated for providing low-interest loans for R&D as an essential component of fostering the development of China’s industrial sector.

China’s semiconductor manufacturing industry still has a long way to go before it can cultivate its own suppliers and meet nearly half of its demand for components and materials. However, Chinese companies are making some remarkable progress, according to Shi Ying, Secretary-General of the China Integrated Circuit Materials and Components Industry Technology Innovation Strategic Alliance (ICMTIA).

Secretary Shi pointed out that intellectual property (IP) protection is a crucial driver of corporate innovation. In recent years, there has been progress in this area, and the number of patent applications filed by the semiconductor industry has also increased. She further noted that, in the fields of chemical-mechanical planarization and smooth silicon wafer circuit processing, China has made significant strides—from being entirely reliant on foreign suppliers of polishing liquids and solder balls to now capturing 30% of the domestic market share.

China’s industrial sector has also made progress in silicon production, said Tian Xin, General Manager of Jiangsu Xinhua Semiconductor Materials Technology Co., Ltd. Currently, Chinese silicon manufacturers account for only 2% of the domestic market share. China still needs to import higher-purity silicon from abroad. However, he is confident that, with strong government support and the rapid growth of demand in the Chinese market, the quality level of Chinese silicon will soon improve significantly.

Meanwhile, China has also made significant progress in the production of specialty gases required by the electronics industry, said Wang Luping, Vice President of Jiangsu Nanda Optoelectronic Materials Co., Ltd. Although just a few years ago China still relied entirely on imports for all specialty gases, Chinese companies can now meet half of the country’s domestic supply needs. He noted that domestically, we still depend on imported valves manufactured abroad—valves that pose certain risks and are critical to the safe storage and handling of electronic gases.

“Although there has been considerable progress, Chinese suppliers today can only meet the demands of the low-end market,” said Shi Ying, Secretary-General of the China Integrated Circuit Materials and Components Industry Technology Innovation Strategic Alliance (ICMTIA). To enhance their technological expertise, domestic companies should actively engage in joint ventures or alliances with foreign firms to leverage their respective strengths. “We need foreign companies to participate in the development of our domestic supply chains,” she urged.

However, international cooperation has still played only a limited role in helping Chinese companies cope with U.S. restrictions on technology exports. John West of VLSI pointed out that the U.S. export controls have hindered China’s ability to import crucial components and materials from the United States—components and materials essential for producing the latest-generation chips. “Currently, the materials that are most severely restricted from import are those at the 10-nanometer level or even smaller,” he said. Top manufacturers such as Intel and Samsung are already developing chips produced on 7-nanometer or even smaller production lines.

John West added that export controls would affect critical components and subsystems essential to the semiconductor industry—such as process controllers, vacuum pumps, lenses, and lasers. He also pointed out that under U.S. export controls, many European semiconductor manufacturing equipment tools would no longer be able to be sold to China, since these tools contain numerous manufacturing parts that are exclusively made in the U.S. Overall, critical components and subsystems represent a market worth 18 billion U.S. dollars; however, given the highly specialized nature of the industry’s technical information involved, it would by no means be easy for China to enter this market.

John West said, “The few individuals who possess both advanced equipment-manufacturing skills and extensive experience are the backbone of these semiconductor companies.” However, he added, “In reality, very few of these people’s real names are ever made public.” He predicted that even after these experts retire, it would still be extremely difficult for Chinese companies to persuade them to move to China.

Given the complexity of integrated circuit manufacturing, the supply chains for materials, equipment, tools, and components extend over long distances and exhibit multi-directional characteristics, as noted by several speakers at the Ningbo conference. Although China is unable to produce the most advanced chip-manufacturing equipment, it remains a key supplier of materials such as rare-earth metals—materials that are critical for many precision instruments—as well as tungsten, which is increasingly replacing copper as the metal used for chip interconnections.

West said that although certain Chinese companies may also be able to gain a foothold in the semiconductor market, which is dominated by Western firms, the industry as a whole would thrive even more without trade restrictions or technology controls. West pointed out that R&D spending in the semiconductor industry is extremely high. By allowing China to participate freely in the market, China could expand its R&D investments on an even broader chip-manufacturing base.

Even without trade restrictions, China would still face numerous obstacles in becoming a high-end chip manufacturer, and the supply of tools and materials needed to produce these chips remains extremely challenging. Without the ability to independently master the high-end market, China will continue to be a major importer of materials and components for many years to come.

Original Chinese link: https://cen.acs.org/sections/cn.html