Chinanews.com, Beijing, December 6th, title: Wei Shaojun: US export control measures are undermining the security of the global semiconductor supply chain
Wei Shaojun, chairman of the IC Design Branch of the China Semiconductor Industry Association and executive vice-chairman of the China Integrated Circuit Innovation Alliance, recently wrote a signed article stating that US export control measures are undermining the security of the global semiconductor supply chain.
The real purpose of the U.S. government is to use the chip shortage incident to rebuild a global semiconductor supply chain without China's participation, and at the same time contain and suppress other competitors.
The following is the full text of the article:
Since 2020, the world has encountered an unprecedented "core shortage".
The first was the shortage of automotive chips, and then the "chip panic" spread to almost all fields.
On the one hand, the global electronic machine shipments are declining, and on the other hand, semiconductor manufacturing companies are full of orders, production capacity is in short supply, and prices are soaring.
The shortage of cores lasted until the second quarter of this year, and the impact was extremely far-reaching.
Semiconductor supply chain security concerns sparked by global chip shortage
For more than half a century, the semiconductor industry has been developing in accordance with Moore's Law.
Although there are periodic production capacity shortages and price fluctuations, they have generally reached a dynamic balance.
The industry generally believes that this core shortage is abnormal, not caused by a huge gap between supply and demand.
In fact, as far as the total global semiconductor production capacity and total demand are concerned, the gap between supply and demand is not large, and must be caused by other factors.
After in-depth research, it can be determined that "man-made disasters" and "natural disasters" are the main causes and drivers.
In 2017, after the US Trump administration came to power, it began to suppress Chinese companies such as ZTE and Huawei.
In May 2020, the United States tailored the export control "Foreign Direct Product Rule" (FDPR) to Huawei and gave it a 120-day grace period.
This has triggered overordering by Huawei and centralized supply from suppliers such as TSMC.
As a world-class company, Huawei's annual chip purchases exceed US$10 billion.
Under the pressure of FDPR, suppliers had to disrupt their original production arrangements in order to deliver goods to Huawei within the deadline set by the US government.
Such a large number of orders and delivery time requirements have seriously disrupted global semiconductor manufacturing.
Unfortunately, the outbreak of the new crown pneumonia epidemic in early 2020 has greatly affected people's production and life.
On the one hand, the epidemic has led to a sharp drop in the demand for purchasing cars in the short term, and auto manufacturers have to stop purchasing car-standard chips; on the other hand, the demand for remote office equipment such as mobile phones and computers has increased significantly.
Semiconductor manufacturers shifted the production capacity of car-standard chips to the production of mobile phones and computer chips, exacerbating the chaos of semiconductor production order.
At the end of 2020, with the slowdown of the new crown pneumonia epidemic and the recovery of automobile consumption, the demand for automotive chips will return.
In view of the high added value of automotive chips, semiconductor manufacturers have once again shifted production capacity, resulting in tighter production capacity of bulk chips such as mobile phones, computers, and home appliances, triggering a global battle for production capacity.
Some large companies have taken "double booking" and "triple booking" to grab production capacity, which has exacerbated the shortage of production capacity.
Therefore, this round of core shortages is the result of the Trump administration’s political factors triggering and superimposing the impact of the new crown pneumonia epidemic.
The impact of the chip shortage is far-reaching.
The first is the delay and reduction of downstream industry shipments caused by the shortage of cores; the second is the sharp rise in chip prices; the third is the disruption of the development rhythm of the semiconductor industry; The cancellation of a large number of orders has triggered the industry to enter the downward channel.
Typically, a chip shortage is just a temporary supply-demand imbalance in the production process that will pass quickly.
However, the core shortage lasted for a long time and involved a wide range, which caused concerns in various countries.
In particular, the shortage of automotive chips has a huge impact on the automotive industry, which has aroused concerns in major industrial countries.
The U.S. Department of Commerce has held two "chip summits" at the White House, and even required major chip manufacturers to hand over sensitive information such as customer lists.
If this is a move by the U.S. government out of public interest, it will undoubtedly be a good thing for the entire industry.
However, driven by the concept of "America First", this move has turned the concerns of countries around the world about the lack of cores into concerns about supply chain security.
In fact, the real purpose of the US government is to use the chip shortage incident to rebuild a global semiconductor supply chain without China's participation, and at the same time contain and suppress other competitors.
This purpose was fully revealed in a series of follow-up operations by the US government.
On April 5, 2021, Japan's "Asahi Shimbun" reported that the United States was negotiating with Japan and South Korea to establish a semiconductor supply chain without China; Taipei's TSMC went to the United States to build an advanced semiconductor manufacturing plant; on March 29, 2022, Korean media reported that the US government proposed the establishment of a "chip four-party alliance" (Chip4); on August 9, US President Biden signed the "Chip and Science Act" It openly stated that any company that accepts US government funding cannot build advanced-node semiconductor manufacturing plants in mainland China; on October 7, the US Department of Commerce not only applied the new extremely stringent FDPR to 28 Chinese companies in the "Entity List", Include 31 Chinese companies in the "Unverified List" (UVL), and also include advanced semiconductor production equipment, high-performance computing chips such as supercomputers and artificial intelligence, Americans and even American green card holders into the scope of control; etc. Wait.
Several Key Elements for Securing the Semiconductor Supply Chain
Today's global semiconductor supply chain is naturally formed under the market mechanism after years of hard work.
A landmark event was the joining of the China Semiconductor Industry Association (WSC) in 2006.
Previously, although China was not a major player in global semiconductors, the prototype of becoming the world's factory has emerged, and the demand for semiconductors has risen rapidly.
The Chinese market has become a strategic battleground for major global semiconductor companies.
In order to ensure that the Chinese market can serve the world's major semiconductor powers and regions for a long time, WSC held a meeting in Beijing in 2006, and the Taiwan Semiconductor Industry Association was renamed "Semiconductor Industry Association in Taipei, China", clearing the way for China Semiconductor Industry Association to join WSC obstacle.
China became a member of WSC, allowing WSC to make up for the shortcomings of the lack of market links.
Obviously, China Semiconductor Industry Association became a member of WSC not because of how advanced China's semiconductor technology and industry are, but because of China's huge market.
that's the truth.
According to statistics from the famous American consulting company IBS, as early as 2014, China produced 84% of the world's mobile phones, 82% of tablet computers, 66% of TV sets and 81% of computers.
Providing quality service to customers nearby is an important measure for semiconductor companies.
Therefore, with the gradual maturity of my country's semiconductor manufacturing enterprises, a large number of foreign companies have also begun to entrust Chinese semiconductor manufacturing enterprises to produce semiconductor products for them.
For a long time, SMIC and Hua Hong Group have received more than 50% of their sales revenue from foreign customers.
This also shows that cost, efficiency and market are the most important factors in the process of semiconductor supply chain globalization.
This phenomenon can be seen in the process of the semiconductor industry from the United States to Europe, and then to Japan, South Korea and Taiwan.
The semiconductor supply chain is an end-to-end complete system, including not only front-end research and development, but also design, manufacturing, packaging and testing, marketing, sales, service and technical support, as well as semiconductor manufacturing equipment and materials.
Due to the extremely wide range of content involved and the variety of industries, almost no country can own all the links.
Even the United States has to rely on lithography machines from the Netherlands, fine chemicals from Japan, manufacturing from Chinese Taipei and the market in mainland China.
Therefore, in order to ensure the security of the supply chain, it is necessary to ensure the security of all links in the supply chain.
As the most important part of the market, once there is a problem, the efforts of all the previous links will be in vain.
Some people in the U.S. government expect to build a supply chain system without China to contain China, the largest semiconductor market, obviously because they lack understanding of the semiconductor industry.
U.S. export controls are undermining the security of the global semiconductor supply chain
Undoubtedly, the United States has made a huge contribution to the globalization of the semiconductor supply chain and is also the biggest beneficiary.
According to the statistics of the US Semiconductor Industry Association, in 2018, many key US companies accounted for more than 20% of their business in China, and the sales involved reached tens of billions of dollars; there are also many companies whose sales revenue and profits mostly come from China. market; 48% of the sales revenue of the US semiconductor industry comes from the Chinese market.
In the past two years, the actions of the U.S. government have undermined the supply chain system it has worked hard to build in the past few decades. Of course, U.S. companies have suffered the most.
The "de-Sinicization" of the semiconductor supply chain that the U.S. government is vigorously promoting is systematically undermining the integrity of the global semiconductor market and will inevitably lead to market fragmentation.
From the development history of global mobile communications, it can be clearly seen that the unification of standards will lead to the unification of product technology, promote the globalization of the supply chain, thereby greatly reducing costs, and ultimately bring prosperity to the global market.
This is impossible in a fragmented market.
A globalized supply chain will definitely bring cost optimization.
More than 200 years ago, Adam Smith, known as the father of modern economics, pointed out in his book "The Wealth of Nations": In any industry, the larger the market size, the finer the division of labor.
The finer the division of labor, the stronger the profitability.
In other words, the finer the division of labor, the lower the cost.
The globalization of the semiconductor supply chain follows this economic law.
If the supply chain is to be forcibly disrupted, the cost will inevitably rise sharply, which must be bad news for profit-seeking entrepreneurs and the capital market.
Semiconductor has been an innovation-driven industry since its birth, and the amount of R&D investment often determines the competitiveness of an enterprise.
According to a report by the Boston Consulting Group in the United States, if the United States and China are completely decoupled, the R&D investment in the US semiconductor industry will drop by 30-60%, which will greatly affect the improvement of US innovation capabilities.
In the long run, the leadership of the United States in the semiconductor field will give way to South Korea and even China.
Although somewhat sensational, it also shows that excluding China from the global semiconductor supply chain will have a huge negative impact on the US semiconductor industry.
In fact, since the globalization process of the semiconductor industry has reached an irreversible level, if this situation is to be forcibly changed, it will only tear and fragment the global semiconductor market, and the semiconductor industry will fall into deep uncertainty. Supply chains will also become insecure.
This is completely contrary to the original intention of the US government to ensure the security of the global supply chain by excluding China.
Adhere to the globalization of the semiconductor supply chain and build a community with a shared future for mankind
The semiconductor industry has been developed for more than half a century and has formed its own law of development.
Both China and the United States have experienced the rapid development of industries due to respect for industrial laws, and have also made the mistake of violating industrial laws and bringing industrial development to a standstill.
Today, when semiconductor technology has entered the nanometer era and R&D and investment are high, any mistake may cause irreparable damage, which is worthy of serious consideration by policy makers.
In fact, the reason why the global semiconductor industry has today's brilliance is global cooperation.
The United States' beggar-thy-neighbor practice will eventually harm others and itself. The global semiconductor industry should be aware of its harm and resolutely resist it.
Industrial competition will always exist, which includes two aspects: one is technological competition - technological innovation is endless, and the pursuit of higher performance, lower power consumption, smaller volume and lower cost is the eternal theme of the development of the semiconductor industry On the other hand, industrial development has always been moving from low-end to high-end, as long as there are high profits, there must be new entrants.
Don't expect to be able to occupy high profits on the one hand and hope that there will be no competitors on the other hand. This is unrealistic.
We advocate healthy competition through innovation, and firmly oppose malicious suppression.
If everyone adopts a tit-for-tat approach, will there still be security in the global supply chain?