On the evening of October 4, SMIC released a notice of "further information on US export restrictions", which made the latest response to the rumor that SMIC was restricted by the United States on September 26, confirming that the United States has imposed export restrictions on SMIC.As far as we know, the documents of the U.S. Department of Commerce, which were exposed online on September 26, Beijing time, were issued by the US Department of Commerce on September 25, local time. As the day when the documents were exposed happened to be the weekend, the domestic staff of the relevant American semiconductor equipment manufacturers were not aware of this. Similarly, SMIC international should also be unaware of this.
So on Sept.27, SMIC issued an announcement denying receiving the U.S. Commerce Department
On the morning of September 28, we learned that an American semiconductor equipment factory had begun to restrict its engineers to install or maintain SMIC. However, under the protest of the Shanghai municipal government, it recovered quickly. This can also confirm that SMIC may not have received the relevant documents at least on that day.
In view of the National Day holiday, as well as the normal trading of Hong Kong stocks on September 30, tomorrow will be the first day of opening after the National Day holiday. In this view, SMIC international should have received relevant documents from the United States between October 1 and October 4, confirming this matter.
Obviously, SMIC's latest announcement confirms the authenticity of the export restriction document signed by the US Department of Commerce previously circulated on the Internet.
According to the contents of the documents previously exposed online, the reasons for the temporary restrictions imposed by the US Department of Commerce on SMIC and its subsidiaries are as follows:"Prior to the US government's review of SMIC and its subsidiaries under section 744 of the ear (export administration regulation), exports to SMIC or its subsidiaries may constitute an unacceptable risk of military end use transferred to China."
Therefore, a license is required for any specific export, re export or domestic transfer (export) of any item because there is a risk that it will be used for "Military" or "Military" transfers.
According to an anonymous insider, the US investigation of SMIC's products is suspected of being used for "Military" or "Military" transfer, or related to a customer of SMIC - "x-core". Through the search engine, you can easily query the "x-core" related chips are used in the military field of news. Some of the products of "x-core" have been OEM in SMIC. Of course, it is no longer meaningful to find out which customer's products are used for military use.
Especially in April this year, the Bureau of industry and security (BIS) of the U.S. Department of Commerce amended the U.S. export control regulations, deleted the civil end-user license exception (CIV) in the original export control regulations, and expanded the export audit of military end-use or military end-users in China and other countries. At the same time, it is proposed to reduce the use scope of additional export license exception (APR). The licensing requirements for China were extended to include both "military end use" and "military end-user", the list of items for which licensing requirements and review policies were applicable, and the definition of "military end use" was expanded. This also makes it easier for customers of manufacturers such as SMIC to involve in "military end use".
For example, you are a company specialized in selling automobile parts in the United States. You sell the parts to an automobile repair factory, and a certain repair factory accidentally uses the American parts you sell one day to repair a truck that does not have a military license but has delivered to the military. This involves "ultimate military use". I believe you must be confused. What does this have to do with me. Sorry, according to the latest regulations of the United States, it is a violation of the export control regulations.
However, it should be pointed out here that this document only indicates that the US government is investigating SMIC, and that before the results of the investigation are available, US enterprises need to apply for licenses before exporting relevant products to SMIC and its subsidiaries. However, it is not to say that the United States has listed SMIC on the entity list or completely banned the export to SMIC.
As of October 5, Beijing time, the website of the US Department of Commerce has not announced that SMIC will be included in the entity list.
SMIC stressed in its previous clarification statement that "the US Department of Commerce has issued a number of important export licenses for the equipment imported and purchased by SMIC for many years." That is to say, before that, some semiconductor equipment or materials exported by American equipment manufacturers to SMIC itself needed export license. Before that, SMIC had been successfully licensed.
however,With the introduction of the new export restrictions on SMIC by the United States, the scope of products that the United States needs to license for SMIC is further expanded, and the difficulty may be upgraded and the cycle will be prolonged.
In this regard, SMIC also said in the latest announcement that "in view of the export restrictions, the company and the Bureau of industry and security (bureau of industry and security) have carried out preliminary exchanges, and the company will continue to actively communicate with relevant U.S. government departments." "The company is assessing the impact of the export restriction on the company's production and operation activities. Because the delivery period of some equipment, accessories and raw materials exported from the United States will be extended or inaccurate, which may have an important adverse impact on the company's future production and operation. "
Some customers have started to speed up the transfer
In May this year, the United States further upgraded its sanctions against Huawei, making SMIC unable to continue to OEM chips for Huawei Hisilicon after September 15. SMIC also lost the big customer of Huawei Hisilicon, and the 14nm process began to lack the support of key customers. Even so, SMIC's capacity utilization is still at a high level at 28nm and above.
Under the influence of the news that the US government is considering sanctions against SMIC, some SMIC customers, for the sake of supply chain security, began to plan to transfer some products to other wafer factories for production, so as to reduce the supply risk caused by SMIC's sanctions by the United States.
For SMIC's customers, affected by the export restrictions of the United States, in case SMIC fails to obtain the relevant license or the license period is prolonged, the production of SMIC will be seriously affected, which will directly affect whether the chip of the customer can be delivered as scheduled, which will have a serious impact on the product planning and market planning of customers and their customers Negative impact. Therefore, many customers have to find a way to transfer the order to avoid risk. This will also lead to further shortage of other wafer foundry capacity, as well as further price rise.
Around September 22, foreign media reported that,The company is seeking to transfer part of its OEM orders to SMIC to other manufacturers, and has contacted some manufacturers including TSMC. According to the data, Qualcomm is the second largest customer of SMIC.
The chairman of a well-known domestic chip manufacturer told us: "we have OEM products in SMIC. Although the old products are not planned to transfer orders at present, new products have to be considered, especially for 28nm products, there should be no other choice."
It should be pointed out that at present, the production capacity of the major wafer foundry is also relatively tight. In particular, 8-inch wafer orders are booming, and the production capacity is very tight. The industry expects that the delivery period of 8-inch wafers will be extended to 3-4 months in the second half of 2020, and the price will be increased by 5-10% compared with the first half of 2020, and the urgent order price in the fourth quarter of 2020 will increase by 10% annually. In this context, if some of SMIC's customers do not have a layout before, it is still difficult to transfer orders to other wafer foundry factories in the short term. Therefore, some customers choose to keep some products in SMIC international production.
"I don't think SMIC will get all the licenses smoothly, for example, most equipment may not get the license. However, we can obtain some production consumables related licenses, so that we can continue to produce mature processes. In this way, we can also adjust the time for us chip manufacturers such as Qualcomm and Broadcom. I think that SMIC's production capacity shortage should be very short-term, because large factories in Europe and the United States have to switch production to avoid risks. Therefore, SMIC will soon have capacity available. At this time, it may be more difficult for us to go to other wafer factories to grab capacity, so some of our products will continue to be produced in SMIC. " The person in charge of a well-known domestic chip manufacturer said.
In any case, affected by the US export restrictions, SMIC's fourth quarter performance may be greatly negatively affected, but it should not be as serious as the outside imagination.
How should SMIC cope with the fall of sanctions?
As mentioned above, although SMIC is subject to export restrictions from the United States, the current situation of SMIC is not at its worst. At present, the United States has not listed SMIC in the entity list, and SMIC is still expected to obtain part of the license, so as to maintain the production of some mature sanctions. After all, American chip manufacturers such as Qualcomm and Broadcom also have many products OEM in SMIC. The U.S. government should consider the interests of domestic enterprises. At least before they complete the transfer, there is a great possibility that SMIC will continue to operate.
In addition, according to SMIC's announcement, some American equipment, accessories and raw materials exported to SMIC will be further restricted by the U.S. export control regulations, and they must apply for export license in advance before continuing to supply to SMIC. It does not mention the technical services and support from semiconductor equipment manufacturers which are very important to SMIC.
On the morning of October 5, we consulted the insiders of an American semiconductor equipment factory, and the other party said, "at present, whether we can provide technical support to SMIC still needs to be approved by the company. However, the installation maintenance that needs to replace the parts should not be done. However, our equipment manufactured outside the United States should be able to continue to supply SMIC. "
It is particularly noteworthy that SMIC north and SMIC Shaoxing are not in the list of restricted enterprises. This also means that the production of the two subsidiaries will not be affected at present, and the policy operation can continue.
Data show that SMIC North was established in July 2013, which is a 12 inch advanced process integrated circuit manufacturing plant jointly invested by SMIC international and Beijing municipal government. It has two 300 mm wafer factories with a monthly output of 35000 pieces. The first wafer plant mainly produces 40nm and 28nm polyion process products; the second wafer plant has 28nm HKMG process and higher technology level. Among them, the snapdragon processor, produced by the 28nm polysilicon gate process and Qualcomm, is the first 28 nanometer system level chip produced by the domestic generation factory.
SMIC Shaoxing was established in March 2018, with a total investment of 5.88 billion yuan in the first phase. It has an 8-inch characteristic process integrated circuit manufacturing line with annual chip shipment of 510000 chips and a packaging and testing production line with annual shipment of 1.995 billion modules. Mass production began in January this year.
Obviously, if SMIC north and SMIC Shaoxing are not included in the restricted list, then SMIC's two enterprises will not be affected by the restrictions in the United States, and some of SMIC's businesses can still operate.
Of course, we cannot place our hopes on the "benevolence" or "omission" of the US government. Once the United States completely blocked SMIC, how should SMIC deal with it?
Prior to this, after the United States listed Fujian Jinhua in the entity list, Jinhua immediately fell into paralysis. The key lies in the fact that the American semiconductor equipment manufacturers immediately interrupted their support, and many of the equipment had not yet completed the installation and debugging, which immediately became "scrap iron". So, once SMIC fails to obtain relevant license and American semiconductor equipment manufacturers stop supporting SMIC, will SMIC face the same situation as Jinhua? Will SMIC's American semiconductor equipment be locked up remotely and become "scrap iron"?
In this regard, we consulted the insiders of a well-known semiconductor equipment manufacturer, and the other party said that the so-called "remote locking" is a rumor, and the equipment will not become "scrap iron" immediately. However, if a wafer factory wants the equipment on the production line to operate continuously, it cannot do without the technical support of the equipment manufacturer.
From the point of view of the hardware side, "because the equipment is used for a period of time, the collected signal will have deviation, so it is difficult to use without the equipment manufacturer's engineers to do calibration. For many wafer factories, they buy equipment and how to use the equipment, which is done by the equipment manufacturer. The wafer factory itself involves less. Moreover, the equipment will be worn out and need to be replaced. Without the original parts provided by the equipment manufacturer, the equipment can not be used
From the software side, "especially in the R & D stage of a new process, many parameters of the process will be adjusted all the time. If the process of this station changes slightly, it will lead to the process change of the next station, which is called loading effect. Then feedback to the equipment manufacturer, the signal collected by the equipment will change. Equipment manufacturers will use special software to model the signal parameters, and the parameters / Models / programs set are called recipe in the industry. When the process changes, the recipe should be adjusted again. "
Therefore, without the technical support of equipment manufacturers, it will be difficult for the wafer plant to maintain normal operation.
So, can SMIC cooperate with domestic semiconductor equipment manufacturers to maintain the operation of relevant American semiconductor equipment?
In this regard, insiders of the equipment factory told us:"I'm afraid it's very difficult for domestic manufacturers of similar equipment to help. First of all, the hardware of these American equipment is not made by domestic manufacturers themselves. These hardware represents a higher level in the industry, at least surpassing the domestic equipment. The main reason why it can't be made in China is that it is difficult to have parts with this precision; secondly, the core hardware of the equipment is also compatible with the system design, software and algorithm. If you don't know how the other party's system, software and algorithm are done, you don't know what the tricky parts are. Only the person who did it first step through one pit after another will know. This is like a very close assembly line, which ring is missing will step on the pit. Moreover, the insurance company will not be responsible for the equipment of the American equipment manufacturer if there are any domestic parts. Usually, these equipment will be insured, because the maintenance cost of the equipment manufacturer is astonishing. After a piece of equipment is bought and died, the maintenance cost may be as expensive as the equipment. "
If it is difficult for domestic equipment manufacturers to help, can the operation of the equipment be maintained to a certain extent through the direct introduction of technical personnel from American semiconductor equipment factories?
Insiders of the equipment factory said: "the software for these semiconductor devices basically has a license or a dedicated cloud. The work of the internal personnel of the equipment manufacturer is actually done on an internal platform. With the cooperation of various departments, there will also be technical confidentiality isolation. Everyone is a screw and works within his own confidentiality authority. The hardware department will not know the internal secrets of the algorithm department. Therefore, even if we dig some technical personnel from the relevant equipment factory, but they have left the original platform, and what they can do is relatively limited. Of course, there are still some effects. "
Therefore, in order to reduce the fatal threat caused by US sanctions, SMIC needs to prepare enough equipment parts for subsequent equipment maintenance. In addition, SMIC also needs to actively introduce relevant technical personnel at the equipment end and actively participate in the maintenance of the equipment end.
At present, the latest news also shows that in the past few months, it has increased the import of production equipment and key replacement components, and even cooperated with Chinese chip factories to establish a central warehouse for stock keeping. According to people familiar with the matter, SMIC's procurement scale from upstream suppliers in the United States, Europe and Japan has exceeded the demand for the whole year of 2020. The procurement projects include process equipment such as etching, lithography and wafer cleaning machines, and testing machines. The amount of relevant consumables used to maintain the operation of the equipment also exceeds the demand for one year. SMIC is eager to stockpile equipment, a source from the US chip equipment manufacturer said. The company has also ordered more equipment than is needed for its current expansion plan.
In addition, as far as we know,Huahong, as the second largest domestic wafer foundry after SMIC, has recently increased its purchasing efforts for American semiconductor equipment.
However, as pointed out above, even if a lot of equipment and parts are prepared in advance, it still needs talents who can install, debug and maintain these equipment, as well as breakthroughs in related key problems, so as to maintain the operation for a long time without obtaining the export license from the United States. At the same time, domestic semiconductor equipment and material manufacturers also need to speed up the breakthrough to help SMIC build a de beautified semiconductor production line without the restrictions of the United States, so as to completely resolve the crisis.
At present, there is a big gap between domestic manufacturers and foreign manufacturers in terms of chip materials and equipment. However, there is still a big gap between domestic manufacturers and foreign manufacturers in terms of chip materials and equipment The pace of manufacturers will also slow down.
According to Taiwan media DIGITIMES, in addition to SMIC international, Huahong, Changdian, Huatian and other fast-growing packaging and testing plants, China's largest NAND flash factory, Changjiang storage, DRAM large factory Changxin storage, and semiconductor equipment factory, medium and micro semiconductors are all on the list of attention in the United States.
"SMIC, Changjiang storage, Changxin storage, etc. must be added to the list of entities to ensure that the key technologies of the United States will not be weaponized against the Americans," said Roslyn Layton, a radical writer published by foreign media Forbes
Obviously, the United States is constantly cracking down on the leading enterprises in the key links of the domestic semiconductor industry through various policy restrictions and psychological intimidation, so as to achieve the purpose of comprehensively suppressing China's semiconductor industry. How to break the situation will be a great test for China.