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CHIPS Funding Terms Will Severely Restrict Chinese Chips Industry | Tom's Hardware

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U.S. CHIPS Funding Terms Will Severely Restrict Chinese

Chips Industry
By Anton Shilov published about 21 hours ago

China's share of memory markets to decline dramatically due to investments

restrictions.

   Comments (5)

(Image credit: Shutterstock)

As details about requirements for companies that receive funding enabled by the CHIPS and
Science Act emerge, it's becoming clear that the act will not only boost the American

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18/4/23, 12:05 U.S. CHIPS Funding Terms Will Severely Restrict Chinese Chips Industry | Tom's Hardware

semiconductor sector, but will also severely restrict investments in the Chinese chip industry
by companies that receive money from the U.S. government. This will have drastic effects on
Chinese foundries and memory makers, who will lose significant market share.

Wafer fab equipment makers from the U.S. already cannot supply tools that can be used to
produce logic chips with non-planar transistors on 14 / 16nm nodes and below, 3D NAND with
128 or more layers, and DRAM memory chips of 18nm half-pitch or less. But the requirements
for companies getting funds under the U.S. CHIPS and Science Act mean that these firms will
not be allowed to invest in any of their fabs in China, according to a report by TrendForce.
This will have a drastic effect on multinational companies like Samsung, SK Hynix, and TSMC,
all of whom have large fabs in China and will likely apply for funding under the U.S. bill. 

Currently, only SK Hynix makes DRAM in China, but it is unclear what production node it uses
there. Samsung and SK Hynix manufacture 3D NAND in China on their 128-layer process
technology, according to TrendForce. While this node is rather competitive today, as makers
ramp up 3D NAND on more advanced nodes, 128-layer 3D NAND will be considerably less
competitive in terms of costs. These companies have permission to install new tools in their
Chinese fabs for now, but they will not be able to upgrade their fabs in China if they receive
funding from the U.S. government. That means they will have to scale down production of
memory in the People's Republic.

(Image credit: TrendForce)

As a consequence, says TrendForce, China's share of the DRAM market will decline from 14%
in 2023 to 12% in 2025, whereas the country's share on the 3D NAND market will drop from
31% in 2023 to 18% in 2025.

(Image credit: TrendForce)

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TSMC has a large fab in China that produces chips on its 28nm-class technologies. The
company cannot upgrade this fab to make 16nm FinFET chips. Furthermore, it will not be able
to expand the production capacity of its Fab 16 if it gets funding under the CHIPS and Science
Act.

(Image credit: TrendForce)

Meanwhile, the U.S. government plans to further tighten its restrictions against the Chinese
semiconductor sector and intends to ban imports of equipment that can be used to make
chips on 28nm nodes. This will hit not only TSMC, but also SMIC.

Furthermore, TrendForce claims that some fabless chip designers will move existing and new
orders to Taiwanese foundries due to client pressure and risk minimization. Foundries like VIS
and PSMC, which focus on mature production nodes, have greatly benefited from this trend
already, according to TrendForce. The market research firm predicts that this shift will result
in significant recovery for affected foundries that are currently affected by inventory
adjustments of IC designers.

TrendForce claims that to avoid geopolitical issues, numerous U.S. firms are limiting the
production areas for memory and storage products and are asking foundries to relocate their
manufacturing plants away from China. TrendForce anticipates a scenario where two
different production areas emerge: one consisting of Chinese fabs that mainly fulfill local
demand and another consisting of fabs situated outside China that serve other markets.

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Anton Shilov

Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of
decades, he has covered everything from CPUs and GPUs to supercomputers and from
modern process technologies and latest fab tools to high-tech industry trends.

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 SEE ALL COMMENTS (5)

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5 COMMENTS COMMENT FROM THE FORUMS 

EyadSoftwareEngineer
What US is smocking exactly!, China already achieved the technology to make chips
around 28-14 nm which required for around 85% of the applications, and they are
sprinting fast toward smaller nods, plus China has one of the largest funds available in
the world, they don't' need funds from US, the loses the US chips makers like Nividia
and...
Read More

REPLY 

anonymousdude
In the mods stead I'll give the reminder to refrain from political mudslinging.

The only real questions are where exactly does this reallocate production and how does
it affect prices? Does it achieve the US goals of having more fabs stateside or does it just
move back to the country of origin i.e SK and Taiwan? And does...
Read More

REPLY 

TechieTwo
IMNHO U.S. companies should not need financial subsidies to compete. Much of what is
produced in chips was engineered in the U.S. not long ago. Producing it in China for
greater profit and less government regulations is a double-edged sword as we see. I'm
willing to pay a little more for goods that support the U.S. economy and security...
Read More

REPLY 

thisisaname

EyadSoftwareEngineer said:

What US is smocking exactly!, China already achieved the technology to make chips
around 28-14 nm which required for around 85% of the applications, and they are
sprinting fast toward smaller nods, plus China has one of the largest funds available in
the world, they don't' need funds from US, the loses the US chips makers like...

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18/4/23, 12:05 U.S. CHIPS Funding Terms Will Severely Restrict Chinese Chips Industry | Tom's Hardware

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