US govt leans on allies to further tighten China's access to chip tech – report

Silicon Valley-based Lam Research and Applied Materials are said to have supplied key equipment to Chinese firms to enable them to build a 5G smartphone chip.

The revelation, from Bloomberg, confirms the views of semiconductor industry experts of how Huawei and its chip fab partner SMIC came to create a 7nm Kirin chip despite US sanctions aimed at preventing them from doing so.

Lam and Applied Materials both supply equipment and services used in wafer fabs. According to Bloomberg, the two companies, along with Dutch lithographic company ASML, had sold the equipment to SMIC ahead of the imposition of sanctions in October 2022.

The news comes just as the US is reportedly putting pressure on allies to further tighten curbs on China's access to chipmaking tech – apparently driven by the Huawei chip breakthrough last September. For example, the Biden Administration wants ASML to stop servicing Chinese customers and for Japan firms to end the sale of key chemicals used in wafer fabs. For now, the Netherlands and Japanese governments are pushing back against the idea.

Huawei created a minor sensation, and sparked patriotic enthusiasm for its products, when it shared details of its new Mate 60 series flagship phone with 5G-level capabilities last September.

'Strongest action possible'

A series of US sanctions beginning in 2019 halted the sale of advanced chips and chip-making technology to the Chinese firm, preventing it from making a 5G device.

In the wake of the Huawei chip surprise, US Commerce Secretary Gina Raimondo promised "strongest action possible" in response.

However, industry analysts and leaders, including AMSL CEO Peter Wennink, have said the yield of the Huawei-SMIC 5G chip is almost certainly quite low, making it unlikely the companies will be able to produce the chips economically at scale.

Mario Morales, an IDC group vice president, echoed this in an online presentation this week. He said he wouldn't be surprised if the two companies used the same tools to develop a 5nm chip "in the next year and a half or so or even sooner than that."

"But it's going to get more challenging to go below that because you're going to need not just the tools like lithography, but you're also going to need the software tools the EDA capabilities in order to be able to simulate the density and complexity of that type of silicon."

That said, he pointed out China is outspending the rest of the world in semiconductor capex. Despite the restrictions on advanced tech, around 70% of the components of a smartphone or connected car are still based on older chip technologies.

"Clearly, you're going to continue to see them innovate at least in the areas where they can. So that means that many of those systems that are using 28nm, 40nm, 55nm and older technology – there's plenty of room for China to continue to grow in this space without touching 5nm or below," he said.

Chinese Foreign Minister Wang Yi blasted the efforts to tighten restrictions on technology access, telling reporters this week: "The US has been devising various tactics to suppress China and keeps lengthening its unilateral sanctions list, reaching bewildering levels of unfathomable absurdity. If the US is obsessed with suppressing China, it will eventually harm itself."

However, according to a recent leak to the Wall Street Journal, it seems China is getting into the "self-harm" business as well.

The Journal has published details on a secretive China government directive called Document 79, which requires that state-controlled organizations replace US ICT suppliers such as Cisco, IBM and Oracle with domestic alternatives by 2027. The directive was issued by the State-Owned Assets Supervision and Administration Commission (SASAC), which oversees China's largest state-owned companies.

Document 79 was so sensitive that high-ranking officials and executives were only permitted to read the order and weren’t allowed to make copies, sources said.