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China’s biggest chipmaker will have a hard time to make progressive chips competitively

1 May, 2023: China’s significant chipmaker SMIC won’t be able to produce cutting-edge chips competitively if it keeps going to be cut off from better equipment, the analysts stated.

State-managed Semiconductor Manufacturing International Co. is making 7-nanometer semiconductor chips placed in the company of Intel and others.

Therefore, SMIC has been the aim of U.S. sanctions since 2020, when it was put on a U.S. trade blacklist which prohibits its allowance to certain technology. It has not been able to obtain the extreme ultraviolet lithography machines the Dutch firm ASML is qualified to make.

Without EUV machines, Chinese tech firms cannot produce high-tech semiconductors on a huge scale at lower costs.

“It’s just not commercially gained for SMIC to make those chips with less advanced equipment,” stated Phelix Lee, equity analyst for Morningstar Asia.

After the 2020 sanctions, the U.S. introduced sweeping export regulations to cut China off from advanced chip tech and equipment. Washington thinks China could use these advanced semiconductors in A.I. and military applications.

The U.S. has sought support from different key chipmaking nations, which include South Korea, Japan and the Netherlands. The Netherlands and Japan have reportedly followed the U.S. in imposing rules to ban China from getting advanced chip tech.

According to Dutch regulations, ASML must apply for a license to ship its EUV gadgets. ASML has not shipped the positively complex machines to China yet.

“Can SMIC produce in a viable way scaled by the hundreds of thousands or millions in some cases? That’s what the most recent tools let you do,” Chris Miller, Chip War’s author, said.

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China’s biggest chipmaker will have a hard time to make progressive chips competitively