"Certain entities, including [CXMT, Hua Hong/HLMC, Huawei, SMIC, and YMTC] are engaged in efforts to produce advanced-node integrated circuits that are especially crucial for the Military-Civil Fusion efforts of the People’s Republic of China and warrant comprehensive export controls to prevent those companies from accessing items made with [U.S.] technologies," the proposal reads.
The U.S. government restricted sales of advanced wafer fabrication equipment to potential foes like China back in late 2021. Under these restrictions American companies and eventually companies from allied nations, including the Netherlands and Japan, must obtain an export license from the U.S. government to ship WFE capable of 14nm process technologies for logic, 18nm-class DRAM fabrication processes, and 128-layer or more NAND if they ship to China-based entities. The new proposal does not introduce anything new in terms of curbs. What it does is change how shipments of tools are permitted.
You may like U.S. lawmakers demand sales ban on chipmaking tools to China China's top chip execs claim ASML alternative 'small, fragmented, and weak' SMIC sent chipmaking tools to Iran's military, Trump administration officials say Today export controls regulate shipments to exact fabs that may or may not be blacklisted by the U.S. government, not entities that own these fabs. To that end, WFE makers can ship advanced machines, such as the ASML Twinscan NXT:1950i/1980Di (which can be upgraded to the sanctioned 5nm-capable NXT:2000i) to companies like SMIC as long as the latter does not use these tools for advanced process technologies. However, controlling how these tools are used is extremely complicated as Chinese chipmakers and authorities do not really endorse such audits. Meanwhile, these advanced tools are indeed used to make chips using 7nm-class process technologies, such as SMIC's N+1 and N+2.
The newly proposed MATCH Act shifts export controls from fab-based controls to a hybrid model that is company-based (and affiliation-based), though fab-level triggers will remain in place. As a result, companies like SMIC will not be able to buy advanced tools for fabs that use trailing nodes and then redirect them to their fabs capable of 7nm-class technologies.
In addition, the MATCH Act is designed to force global alignment on semiconductor equipment export controls. At first, the U.S. will pursue coordination with allied supplier countries such as the Netherlands, Japan, South Korea, and Taiwan. If that effort fails, then the U.S. will expand restrictions extraterritorially to cover foreign-made tools that contain more than 0% of American technology, or require servicing that relies on American technologies. The end goal is to close loopholes that enable adversaries to circumvent existing controls.
An avid reader who has been following U.S. restrictions on advanced fab tools will ask whether it will be possible for restricted China-based entities to get sophisticated WFE from various intermediaries that are not restricted. As far as we can tell, while intermediary entities can in theory acquire semiconductor manufacturing equipment and divert it illegally, the MATCH Act is explicitly structured to prevent circumvention via intermediaries as export controls attach not only to the initial transaction, but also to end-use, end-user, reexport, and servicing. Therefore, routing semiconductor equipment through a third-party entity would not bypass restrictions, but will instead expose all parties involved, which essentially means losing access to advanced WFE in the future and servicing of existing tools, which in turn will render these machines useless over time.
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Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/semiconductors/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/semiconductors/u-s-lawmakers-aim-to-ban-export-of-duv-chipmaking-and-etching-tools-to-leading-firms-in-china-bipartisan-proposal-would-ban-lithography-equipment-for-huawei-smic-and-others#main
- https://www.tomshardware.com
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