China Chip Bottlenecks – Defense One

Earlier this year, US investigators learned of a plan to supply semiconductor manufacturing equipment to China.

The alarm was raised after two Chicago buyers of the Dynatex DTX-MDB 150 paint-and-break machine asked the California manufacturer to file export documents that did not indicate the machine’s final destination: Chengdu GaStone Technology Company, a firm in southwest China, under US administration. sanctions for illegal procurement scheme of military-grade integrated circuits in 2021. In April, Lin Chen was arrested and charged when Han Li fled to China.

The case sheds light on the complex competition between the United States and China to produce increasingly advanced chips. CGTC sought a Dynatex machine to perform the final step in manufacturing military-grade gallium arsenide chips that can better withstand extreme temperatures and radiation than conventional silicon devices. If they succeeded, the Chengdu-based firm could increase its “success” in chip production and therefore its ability to meet consumer demand, including from the Chinese military.

Although companies like SMIC have turned China into a chip manufacturing hub, the country still cannot mass produce cutting-edge chips on its own. Despite massive government investment, China continues to rely on foreign companies to make the chips that power everything from the artificial intelligence revolution to the Internet of Things to the most advanced military hardware. The problem remains a huge vulnerability for China’s economy, its military and its global ambitions.

Commentators inside China point to advanced chips as one of the bottlenecks holding the country back from technological parity with the world’s most advanced economies. In 2018 the government S&T Daily The publication named 35 such technologies, most of which are in the areas of information technology, electronics, manufacturing, biotechnology and new energy vehicles. Eight of these bottlenecks were related to the development and production of advanced chips, casting doubt on the country’s ability to produce such chips in the near future.

Western influence

While China’s struggle is hardly a secret, few people think about what exactly it means, why it is so difficult to overcome, or what leverage it could give the US and its allied governments.

To paraphrase Boromir, you can’t just stick silicon into one end of the machine and wait for an advanced chip to come out the other. Manufacturing these chips is a complex, multi-step process. And each stage, in turn, presents multiple opportunities for the U.S. and its governments to put pressure on China’s efforts to produce advanced chips.

Before chips can be manufactured, they must be designed. This requires the use of electronic design automation software to bring order to the billions of transistors that make up a modern chip, a task that human engineers cannot do on their own. This is where China’s first bottleneck lies. Chinese-made EDA software from companies such as Beijing Empyrean and Primarius Technologies can handle analog designs and simpler IoT applications, but does not seem to be able to compete at a high level. Thus, the Chinese market for this specialized software is dominated by the three largest US developers: Synopsys, Cadence and Siemens EDA, which together own 90 percent of the Chinese market. In 2022, the US Department of Commerce imposed export controls on the most advanced versions of this software needed to develop the latest 3nm chips.

The raw materials then need to be turned into silicon wafers, which will eventually become chips. Silicon is mined from sand, refined to 99.9999999% purity, melted and turned into a single crystal ingot. This ingot, called a “boule”, is cut into thin strips and polished to create an ultra-flat, mirror-like surface. To achieve the required nanometer-level smoothness, ultra-precise polishing equipment is required. Herein lies the second problem: China seems to lack companies that can produce this equipment, although their research shows some promising results. Leading manufacturers are located in the USA and Germany. In 2020, the US government imposed export controls on the most advanced versions of this equipment.

Once the wafers are ready, one side of the wafers is coated with a light-sensitive chemical called photoresist to prepare it for photolithography. The production of this chemical is the third bottleneck. “Extreme ultraviolet” photoresist is needed for the densest chips below 20 nm, a market dominated by Japanese companies bound by strict export control policies. Even South Korean and Taiwanese semiconductor manufacturers depend on advanced Japanese resists. Chinese companies make less advanced photoresists that are in high demand around the world for low-cost commodity chips, such as those used in cars and consumer products. But their products are not sufficient for advanced devices.

Chinese firms such as Jingrui, Red Avenue and its subsidiary Beijing Kempur, a US-China joint venture, are conducting research into advanced photoresists. This will not be easy because older bisazide photoresists cannot create circuits smaller than two micrometers (2000 nanometers). Additionally, the most advanced core technologies, including fine particle filtration for new chemicals such as fullerenes (a zero-size carbon nanomaterial for high-resolution photoresists), cannot be exported from the US and its allies to China without a license.

The light-sensitive plates are then passed through a photolithography machine, which projects light through a series of grids to create microscopic patterns. There is another bottleneck here. The most advanced machines, produced by the Dutch company ASML, consist of more than 100,000 parts and cost hundreds of millions of dollars. They have applied a “presumption of refusal” in the export application process led by Washington since 2022.

Although China produces vast quantities of less advanced chips, it still cannot replicate the sophisticated photolithography equipment required for the most advanced devices. Judging by past results, prospects for quickly catching up with the world’s photolithography industry leaders are not good: China has been aiming for this since the 1980s and has historically lagged behind by a decade or two. China’s leading manufacturer SMIC is reported to be able to produce 28nm chips, a far cry from the global lead of 2-3nm. And while China is reportedly now producing the 7nm chip for Huawei’s latest smartphone, it is believed to be using a less advanced and less efficient form of lithography produced on a machine purchased from ASML before regulatory controls came into effect. USA. The SMIC success rate for per-wafer chips can be low and commercially unacceptable, resulting in high costs and production limitations. And Washington is trying to further restrict the sale and service of the lithography machines that SMIC used to make them.

There are almost certainly other bottlenecks hidden in the complex manufacturing process of modern semiconductors, perhaps at the stages of etching, ion implantation, metal deposition, dicing, and final assembly and testing. For example, Chen and Li’s efforts in Chicago show that China is dependent on foreign “rewrite-and-break” machines to slice military-grade gallium arsenide chips, making this another potential bottleneck not named in the S&T Daily2018 list.

The many bottlenecks that China has to contend with create an ambivalent picture. They show the challenges it faces in finding world-class chips. Meanwhile, they show how Washington’s efforts to keep advanced semiconductor technology out of China have made some progress but still face significant obstacles. Export controls have only been partially updated since the Cold War and rely on a network of countries and companies. The United States needs a new multilateral export regime based on consensus among key semiconductor tooling partners, many of whom would prefer to continue selling to China at some level.

China will continue to improve chip production through overt and covert means, since the only thing that is certain about the future of the economy and war is that it will be based on semiconductors. The question is where these technologies will come from and how much chips and equipment will be smuggled into China.

Matt Brazil is a China analyst at BluePath Labs and co-author (with Peter Mattis) Chinese Communist Espionage, Intelligence Primer (2019). He is a former Department of Commerce and Intel Corporate Security official. His views do not reflect the views of any institution.

Matt Bruzzese is a senior Chinese language analyst at BluePath Labs.

P. W. Singer is the author of bestselling war and technology books such as Wired for War, Ghost Fleet, and Bur-In; Senior Fellow at New America; and co-founder of strategic storytelling company Useful Fiction.