China’s Chance of “Sputnik” Success

China's Chance of "Sputnik

China’s Chance of “Sputnik”: China’s chip export restriction policy implemented by the Unit States (US) is not impossible to lead Beijing to experience a “Sputnik” moment that can encourage Chinese chip manufacturers to try to find creative engineering solutions. China could also potentially chart their own course although there is a chance that the solution will not be commercially successful in the long term. Experts say.

China’s Chance of “Sputnik” Success

Sputnik itself is the name of the satellite made by the Soviet Union which successfully orbit Earth in 1967 in the middle of the cold war. The launch made history because it was the world’s first satellite. The success achieved by the Soviet Union had made the US nervous.

Under new regulations announc by President Joe Biden’s administration on October 7. US companies must stop supplying equipment that can be used to manufacture advanced chips. However, the restriction rules do not apply to producers who have previously obtained a license.

The moves would undermine Beijing’s efforts to develop its own chip industry aimed at reducing its dependence on foreign-made chips. China consumes more than three-quarters of the semiconductors sold globally, which will reach $556 billion by 2021, but generate about 15 percent of global output.

“Technology decoupling could serve as Sputnik China’s moment of innovation.

Forcing it to take a top-down and self-reliant approach. Especially in semiconductor (production).” Citi economists said in a note. He likened the phenomenon to the surge in spending and research seen in the US after the launch of the world’s first satellite by the Soviet Union.

The restrictions were also imposed just before the Communist Party Congress convened in Beijing, where President Xi Jinping is expected to secure an unprecedented third term. The importance of self-sufficiency in technology, which has been Xi’s priority for the past decade, is likely to emerge as a key theme for this year’s Congress.

The Boston Consulting Group estimates by 2021 that a country will need at least $1 trillion in additional initial investment to establish self-sufficiency in local chip supply chains. The US restrictions may also spur Chinese chipmakers to try to make advanced chips using creative engineering solutions with old technology that are not subject to sanctions, experts say.

This is something contract chipmaker China Semiconductor Manufacturing International Corp (SMIC) has tried before. In late 2020 Washington banned it from acquiring a state-of-the-art chip-making device called an EUV engine from Dutch company ASML. In fact, this tool is very important for producing chips using a 7 nanometer process node. While the sanctions are meant to prevent SMIC from producing advanc chips. Some analysts have found signs that SMIC is still succeeding in producing 7 nm chips by tweaking the simpler DUV engines that can still be purchas freely from ASML.

Experts say such an effort, however. Is unlikely to produce a commercially viable product for mass production.

Experts say China’s own equipment makers are four to five years behind their overseas counterparts. This makes them unsuitable as instant replacements for lost equipment from US suppliers such as KLA Corp. Applied Materials. And Lam Research. Two other leading Chinese chipmakers likely to take a hit are NAND memory chip maker Yangtze Memory Technologies Co Ltd (YMTC) and DRAM maker Changxin Memory Technologies Inc (CXMT).

Overseas appliance manufacturers will also be dealt a painful blow as China’s efforts to nurture its domestic chip industry have been a boon for many of them. KLA. Applied Materials. And Lam Research each derive about 30 percent of their revenue from China. Which ranks as the top geographic market as well as the fastest growing.

Applied Materials said Wednesday the restrictions on exports to China would result in a $250-$550 million loss in net sales in the quarter ended Oct. 30. With a similar impact expected in the next three months. Sources at the toolmaker also said they were trying hard to comply with the new export restrictions. With some companies ordering broad supply bans to avoid breaking the rules. Which they said were ambiguous.

Washington is also scrambling to deal with the unintended consequences of its new export curbs. People familiar with the matter say. Hours before the new restrictions went into effect. South Korean company SK Hynix said it had US authorization to receive goods for its chip production facilities in China without the additional licenses imposed by the new rules.

But business at appliance makers serving Chinese customers has slowed dramatically. Leaving their staff with little work to do but creating gaps for Chinese equipment makers looking to catch up with western rivals. Sources said. China’s Chance of “Sputnik” Success

About the Author: AKDSEO

You May Also Like