China’s largest semiconductor company, SMIC, is facing challenges as experts confirm that its chips have a high cost and low yield rate, making them unable to meet international standards. A recent report reveals that SMIC’s chips are 40 to 50 percent more expensive than those produced by Taiwan’s TSMC, a leading company in the industry. Additionally, SMIC’s yield rate, which represents the number of chips considered good enough for shipment, is less than one-third of TSMC’s.
Experts believe that democratic countries maintain an advantage in chip technology, posing a significant challenge to the ruling Communist Party of China (CCP). Despite international sanctions on advanced chips and chip-making equipment imposed by the United States and the Netherlands, SMIC is attempting to produce 5-nanometer Kirin chips using existing manufacturing equipment. However, these chips are still one generation behind the currently most advanced 3-nanometer chips.
The report also highlights that SMIC’s chips are significantly more expensive than TSMC’s chips of the same level, and its yield rate is much lower. This is attributed to SMIC’s less advanced technology, resulting in a higher proportion of defective chips and requiring more investment and materials.
Huawei, a Chinese company, recently launched the Qingyun L540 notebook computer claiming that all parts were made in China. However, it was later revealed that the 5-nanometer chip inside the device was made by TSMC from Taiwan. This discovery contradicts the CCP’s claim of a major breakthrough in China’s chip technology.
Export restrictions on chip machinery and equipment imposed by the United States and the Netherlands have hindered China’s ability to achieve market efficiency. As a result, China is resorting to any means necessary to produce chips without considering the cost. However, experts argue that China will struggle to keep up with the next generation of optical technology and smaller nanometers.
The CCP has been facing technological containment from the West in recent years due to allegations of technology theft and human rights violations. To counter this, the CCP has invested significant amounts of money in establishing a “self-sufficient” semiconductor supply chain.
In 2023, the Biden administration further tightened export restrictions on advanced chip manufacturing equipment to protect national security. The United States has also formed long-term cooperation with the Netherlands and Japan to prevent the CCP from obtaining the latest chip production tools.
Experts believe that the U.S. chip sanctions have already had an impact on China. While China may be able to produce lower-end chips, it lacks the market scale and efficiency necessary for larger-scale production.
TSMC, the world’s largest semiconductor maker, recently announced plans to build a second factory in Japan and two semiconductor factories in Arizona, USA. Experts predict that cooperation between Taiwan and the United States, Japan, and the European Union in semiconductors will be crucial in 2024.
The technological war between China and the United States primarily revolves around semiconductors and artificial intelligence. The ability for China to impose its own standards as global standards is seen as crucial, and the West, led by the United States, needs to maintain its standards during this period.
In conclusion, SMIC’s chips are facing significant challenges due to their high cost and low yield rate. China’s ambition to establish a self-sufficient semiconductor supply chain is being hindered by international sanctions and technological containment from democratic countries. While China may be able to produce lower-end chips, it struggles to keep up with international standards and market efficiency. Cooperation between Taiwan and democratic nations becomes crucial in maintaining technological advantages in semiconductors.
