Chinese Chipmakers Look Inward for Equipment Suppliers

Country aims to build up domestic production of silicon fab tools

Semiconductor fabrication relies on an ecosystem of equipment suppliers to fill the vast expanses of cleanrooms and to process the myriad of manufacturing steps that turn bare silicon into finished chips.

These specialist equipment suppliers represent some of the most advanced technology companies in the world, with their fabrication tools selling for well over $100 million each. The top four — ASML (Netherlands), Applied Materials (US), Tokyo Electron (Japan) and Lam Research (US) — together command 65% of the sector’s revenue. They offer the most advanced and foundational technologies, such as extreme ultraviolet lithography, to enable semiconductor manufacturing at the latest process nodes of 3 nm and 5 nm.

However, for Chinese semiconductor companies, this equipment market landscape means they are beholden to foreign tool-makers for access to the latest fabrication technologies. With nearly all access to such modern equipment cut off as a result of geopolitical tensions between Beijing and Washington, the Chinese semiconductor industry is now turning inward to accelerate development of domestic alternatives to supply wafer fab tools.

Arguably, the most critical step in semiconductor fabrication is lithography — the process of defining circuit patterns on light-sensitive, photoresist-covered silicon wafer. Front-end lithography tools are responsible for patterning the smallest individual transistor features.

Within the Chinese semiconductor industry, the most prominent domestic maker of lithography tools is Shanghai Micro Electronics Equipment Group (SMEE). The company has been in business for 18 years, with i-line steppers as its main products for front-end lithography.

Recently, SMEE demonstrated a prototype immersion lithography tool using an argon fluoride laser; it plans to create a production version in early 2022. Argon fluoride immersion lithography tools could take SMEE down to a 28 nm process node. This mature node probably represents the “sweet spot” for silicon manufacturing in China in the near term: processes of 28 nm and above account for more than half of silicon production worldwide.

Advanced Micro-Fabrication Equipment China (AMEC) is the country’s leading manufacturer of etch tools, which are used to chemically remove material from a wafer surface after lithography tools have defined a layer of a circuit pattern.

AMEC etch tools have been purchased by TSMC and tested by other major semiconductor companies such as Intel, Micron and Samsung. AMEC has recently demonstrated dielectric etch capabilities on a 5 nm node, although most of its commercial tools are used in more-mature process fabs around the world.

In addition to global recognition, AMEC leads the Chinese semiconductor equipment market in etch tools ahead of another domestic equipment suppliers, such as Naura. The latter is also a leading supplier in China of equipment for chemical vapour deposition, another key process step that, along with lithography and etching, is a foundational technology needed for semiconductor fabrication.

In the mid-1970s, Japan launched an initiative to strengthen its semiconductor equipment capabilities and compete with leading suppliers in the US. Within 10 to 15 years, it moved into second place globally as a producer of tools for semiconductor manufacturing — a position it still holds today. We believe China should look to the Japanese model as a blueprint for developing its domestic semiconductor equipment industry. One of the hallmarks of Japan’s remarkable ascension in the 1970s and 1980s was the fact that it started as a leading producer of semiconductor packaging and assembly tools — just as China is today.

In addition, with the Chinese semiconductor market accounting for 35% of global demand and growing, China holds significant sway in the industry and is likely to exert that influence on development efforts that favour local suppliers. And perhaps most importantly, China has nearly eight times more science, technology, engineering and mathematics graduates than the US and ten times those of Japan, according to Georgetown University’s Center for Security and Emerging Technology. These graduates will provide a stream of talent to tackle the challenges of building a world-class semiconductor equipment industry.

The Chinese semiconductor industry is responding to unprecedented upheaval caused in response to trade skirmishes with the US. Being shut out of key technologies will force the Chinese semiconductor industry to focus inward and develop the skills and hardware to remain a viable player in the global semiconductor arena.

China’s semiconductor industry is poised to become self-sufficient in 28 nm silicon production as domestic equipment makers step in to fill the void. With an uncompromising development plan in place, Chinese chipmakers may also be moving toward completely domestically powered 14 nm production by the end of 2022. As the old proverb goes, “necessity is the mother of invention”, and the need for a local equipment ecosystem will no doubt prompt China to meet the challenges ahead.