Analysts at TrendForce have revealed how chip industry in China will face the music from the new semiconductor restrictions announced by the U.S. Department of Commerce on October 7.
The ban will be primarily limited to 16nm, 14nm, or more advanced processes for logic ICs (such as FinFET or GAAFET), 18nm or more advanced processes for DRAM, and 128-layer or higher products for NAND Flash chips, TrendForce said.
Global semiconductor revenue is projected to grow 7.4 percent in 2022 as compared with 26.3 percent increase in 2021, according to the forecast from Gartner released on July 27, 2022.
2022 semiconductor revenue has been reduced from the previous forecast by $36.7 billion, to $639.2 billion, as economic conditions are expected to worsen through the year. Memory demand and pricing have softened, especially in consumer-related areas like PCs and smartphones, which will help lead the slowdown in growth.
In addition to existing restrictions on the logic IC sector, this update extends to the memory category. In addition to Chinese-funded enterprises, these restrictions cover foreign-owned production centers in China and they will need to apply for approval to obtain manufacturing-related equipment, TrendForce said.
In addition, the new restrictions increase the difficulty for China to obtain any chips that may be used for military purposes through imports.
In terms of foundry equipment supply, after SMIC was included on the Entity List in 2020, the US targeted US equipment manufacturers who wished to export equipment used for processes below 16nm (inclusive) to Chinese fabs not included on the Entity List including HuaHong Group, etc., and even foreign-owned production centers located in China, instituting a review before export can be implemented.
Most Chinese fabs are currently focusing their production expansions on processes 28nm and above. As for non-Chinese wafer foundries, only TSMC Nanjing is focused on 28nm expansion and has no plan for advanced processes.
The ban is stifling the possibility for China to develop and expand processes 16nm and below and the expansion of processes 28nm and above is subject to a protracted review process.
In addition, the US ban will expand the scope of its restrictions following the inclusion of high-end GPUs such as NVIDIA’s A100/H100 and AMD’s MI250 in the HPC sector into the range of sanctions at the end of August.
Nvidia on Friday said it does not expect new U.S. export control rules against sending chips to Chinese supercomputing systems to have a material impact on its business.
Nvidia said it had already been made subject to rules, which it disclosed to investors last month, saying that they could impact $400 million of its sales in China for its current fiscal quarter.
In the future, it will target US manufacturers, including HPC sector CPUs, GPUs, and AI accelerators used in datacenter, AI, and supercomputer applications, requiring review before such items can be exported to China.
In addition, foundries may no longer be able to manufacture any of the above-mentioned HPC-related chips for any Chinese IC design houses. Regardless of whether the client is a Chinese or American IC design house, most HPC-related chips are currently manufactured by TSMC with mainstream processes at the 7nm, 5nm, or certain 12nm nodes.
It will all have a negative impact on the future purchase order status of TSMC’s 7nm and 5nm processes.
The DRAM portion of sanctions will be limited to the 18nm process (inclusive) and equipment must be reviewed by the Department before import. This move will restrict or delay the development of China’s DRAM sector.
CXMT possesses the largest memory market share for a Chinese company in the Chinese market. Since 2Q22, CXMT has been committed to moving from the 19nm process into the 17nm process. Though the purchase of machinery to fulfill future needs had been accelerated before the ban, volume is still insufficient. CXMT continues to build new plants, including Phase 2 in Hefei and SMBC (SMIC Jingcheng), which is in discussion with SMIC. All of these projects will face difficulties in obtaining equipment in the future.
In addition to CXMT, the C2 plant of SK hynix’s DRAM production center in Wuxi is also affected by the restriction order. The factory accounts for approximately 13 percent of the world’s total DRAM production capacity and its process has evolved to 1Ynm and more advanced nodes, which means that subsequent continuous addition of equipment required for production requires approval on a case-by-case basis.
In terms of NAND Flash, the import of NAND production equipment into China will be restricted in the future, especially for equipment used in the manufacture of product of 128 layers and above (inclusive), requiring prior approval before import. This ban will impact the long-term plans of China’s YMTC to upgrade its factory campuses as well as Samsung’s Xi’an plant and Solidigm’s process migration plan in Dalian.
This ban will restrict YMTC from expanding its customer base. YMTC has been sending SSD products out for verification, hoping to infiltrate the supply chain of non-Chinese customers in 2023.