By Joe McDonald
AP Business Writer
BEIJING (AP) — Furious at US efforts to cut off access to technology to make advanced computer chips, the leaders of china they seem to be struggling to figure out how to retaliate without hurting their own ambitions in telecommunications, artificial intelligence and other industries.
The government of President Xi Jinping views the chips used in everything from phones to kitchen appliances to fighter planes as crucial assets in its strategic rivalry with Washington and efforts to gain global wealth and influence. Chips are at the center of a “technological war,” a Chinese scientist wrote in an official journal in February.
China has its own chip foundries, but they only supply low-end processors used in cars and home appliances. The US government, starting with then-President Donald Trump, is cutting off access to a growing range of tools to make chips for computer servers, AI and other advanced applications. Japan and the Netherlands they have banded together to limit access to technology they say could be used to make weapons.
Xi, in unusually scathing language, accused Washington in March of trying to block China’s development with a campaign of “containment and suppression”. She called on the public to “dare to fight.”
Despite that, Beijing has been slow to retaliate against US companies, possibly to avoid disrupting the Chinese industries that assemble most of the world’s smartphones, tablets and other consumer electronics. They import more than $300 billion worth of foreign chips every year.
The ruling Communist Party is spending billions of dollars to try to accelerate chip development and reduce the need for foreign technology.
China’s loudest complaint: You can’t buy a machine available only from a Dutch company, ASML, which uses ultraviolet light to etch circuits on silicon chips on a scale measured in nanometers, or billionths of a meter. Without it, Chinese efforts to make transistors faster and more efficient by packing them closer together into fingernail-sized slivers of silicon are at a standstill.
Processor chip manufacturing requires some 1,500 steps and proprietary technologies from US, European, Japanese and other vendors.
“China will not swallow everything. If damage occurs, we must take measures to protect ourselves,” Chinese Ambassador to the Netherlands Tan Jian told the Dutch newspaper Financieele Dagblad.
“I’m not going to speculate on what it could be,” Tan said. “It won’t just be harsh words.”
The conflict has prompted warnings that the world could become decoupled or split into separate spheres with incompatible technology standards, meaning computers, smartphones and other products from one region won’t work in another. That would increase costs and could slow innovation.
“The bifurcation in the technological and economic systems is deepening,” Prime Minister Lee Hsien Loong of Singapore said at an economic forum in China last month. “This will impose a huge economic cost.”
Relations between the United States and China are at their lowest level in decades due to disputes over security, Beijing’s treatment of Hong Kong and Muslim ethnic minoritiesterritorial disputes and multi-billion dollar trade surpluses from China.
Chinese industries will “hit a wall” in 2025 or 2026 if they can’t get hold of next-generation chips or the tools to make their own, said Handel Jones, a technology industry consultant.
China “will start to lag significantly,” said Jones, CEO of International Business Strategies.
However, Beijing could have leverage as the biggest source of batteries for electric vehicles, Jones said.
Chinese battery giant CATL supplies automakers in the US and Europe. Ford Motor Co. plans to use CATL technology in a $3.5 billion battery factory in Michigan.
“China will hit back,” Jones said. “What the public might see is that China is not giving the US batteries for electric vehicles.”
On Friday, Japan ratcheted up the pressure on Beijing by joining Washington in imposing export controls on chipmaking equipment. The announcement did not mention China, but the commerce minister said Tokyo does not want its technology used for military purposes.
A Chinese Foreign Ministry spokeswoman, Mao Ning, warned Japan that “weaponizing science, technology and trade affairs” would “harm others as well as oneself.”
Hours later, the Chinese government announced an investigation into the largest US memory chip maker, Micron Technology Inc., a key supplier to Chinese factories. The Cyberspace Administration of China said it would look for threats to national security in Micron’s technology and manufacturing, but gave no details.
The Chinese military also needs semiconductors for the development of stealth fighter planes, cruise missiles and other weapons.
Chinese alarm grew after President Joe Biden in October expanded Trump-imposed controls on chip-making technology. Biden also banned Americans from helping Chinese manufacturers with some processes.
To nurture Chinese suppliers, Xi’s government is stepping up support that industry experts say already amounts to up to $30 billion a year in research grants and other subsidies.
China’s biggest memory chipmaker, Yangtze Memory Technologies Corp., or YMTC, received a 49 billion yuan ($7 billion) injection this year from two official funds, according to Tianyancha, a financial information provider.
One was the government’s main investment vehicle, the China National Integrated Circuit Industry Investment Fund, known as the Grand Fund. It was founded in 2014 with 139 billion yuan ($21 billion) and has invested in hundreds of companies.
The Gran Fondo launched a second entity, known as Gran Fondo II, in 2019 with 200 billion yuan ($30 billion).
In January, chipmaker Hua Hong Semiconductor said Big Fund II would contribute 1.2 billion yuan ($175 million) for a planned 6.7 billion yuan ($975 million) wafer manufacturing plant in Wuxi, in eastern China.
In March, the Cabinet promised tax breaks and other support for the industry. He did not give any price tag. The government has also established “integrated circuit talent training bases” in 23 universities and six other schools.
“Semiconductors are the ‘main battleground’ of the current Sino-US technology war,” Junwei Luo, a scientist at the Official Institute of Semiconductors, wrote in the February issue of the Journal of the Chinese Academy of Sciences. Luo called for “self-reliance and self-improvement in semiconductors.”
The scale of spending required is enormous. The world’s industry leader, Taiwan Semiconductor Manufacturing Corp., or TSMCIt is in the third year of a three-year, $100 billion plan to expand research and production.
Developers included Huawei Technologies Ltd. and VeriSilicon Holdings Co. can design smartphone logic chips as powerful as those made by Intel Corp., Apple Inc., South Korea’s Samsung Electronics Co. or Britain’s Arm Ltd., according to industry researchers. But they can’t be made without precision technology from TSMC and other foreign foundries.
Trump in 2019 crippled Huawei’s smartphone brand by preventing it from buying American chips or other technology. US officials say Huawei, China’s first global technology brand, could facilitate Chinese espionage, a charge the company denies. In 2020, the White House tightened controls, preventing TSMC and others from using US technology to produce chips for Huawei.
Washington posed new hurdles for Chinese chip designers in August by imposing restrictions on software known as EDA, or electronic design automation, along with governments in Europe, Asia and other countries to limit the spread of “dual-use” technologies that could be used to make weapons. .
In December, Biden added YMTC, the memory chip maker, and a few other Chinese companies to a blacklist that limits access to chips made anywhere with American tools or processes.
Foundries in China can etch circuits as small as 28 nanometers away. By contrast, TSMC and other global competitors can engrave circuits as close as three nanometers apart, ten times the precision of the Chinese industry. They are moving towards two nanometers.
To make the latest chips, “you need EUV (extreme ultraviolet lithography) tools, a very complicated process recipe, and not just a couple billion dollars, but tens and tens of billions of dollars,” said Peter Hanbury. , which follows the industry for Bain. and company
“They’re not going to be able to produce competitive chips for servers, PCs and smartphones,” Hanbury said. “You have to go to TSMC to do that.”
China’s ruling party is trying to develop its own tool providers, but researchers say it lags far behind a global network that spans dozens of countries.
Huawei said in a video on its website in December that it was working on EUV technology. But creating a machine comparable to ASML’s could cost $5 billion and require a decade of research, according to industry experts. Huawei did not respond to a request for comment.
The day when China can supply its own EUV machine is “a long way off,” Hanbury said.
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AP researcher Yu Bing in Beijing and AP journalist Mike Corder in Amsterdam contributed.
