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SMIC Stockpiling Supplies Far More Than One Year’s Needs

Semiconductor Manufacturing International Corporation (SMIC) is the Chinese partially state-owned publicly-listed semiconductor foundry company. The U.S. Department of Commerce has placed an export restriction on its suppliers. It is scaling up its procurement from upstream suppliers in the United States, Europe, and Japan, with a size exceeding a full-year’s demand for 2020. The procurement items include etching, lithography and wafer cleaning equipment. The purchase of consumables used to maintain the operation of the equipment is also more than one year’s need. SMIC is even cooperating with other Chinese chip manufacturers to establish a shared reserve of such parts, and has established a central warehouse to store these products.

A source from a U.S. chip equipment manufacturer said that SMIC is eager to stock up on equipment. The company ordered more equipment than needed for its current expansion plan. At the end of last year, ASML (ASML.US), Europe’s largest chip manufacturing equipment manufacturer, shipped an advanced extreme ultraviolet lithography (EUV) chip production tool to SMIC. However, the transaction has been put off.

SMIC relies heavily on foreign semiconductor equipment suppliers, including U.S. based Applied Materials, Lam Research, KLA, Taradyne, ASML in the Netherlands and Tokyo in Japan.

Source: Sina.com, October 4, 2020
https://finance.sina.com.cn/tech/2020-10-04/doc-iivhvpwz0355862.shtml

LTN: U.S. Sanctions China’s Chip Maker SMIC

Major Taiwanese news network Liberty Times Network (LTN) recently reported that, according to an official document that the U.S. Commerce Department’s Bureau of Industry and Security (BIS) issued, the U.S. government has decided to apply export controls on goods sold to SMIC based on the U.S. Export Administration Regulations (EAR) Section 744.21. The restriction is based on the fact that SMIC products are ultimately used for military purposes. The U.S. Department of Commerce has informed U.S. export companies about this decision. The document listed SMIC and its branches as well as directly related companies inside and outside of China. SMIC is China’s largest chip maker and Huawei’s only hope for a domestic supply of chips. However, SMIC depends heavily on U.S. technology for manufacturing equipment and software. Also, SMIC technology is generations behind leading chip-making vendors like TSMC (Taiwan Semiconductor Manufacturing Company). This new U.S. sanction will place huge pressure on Huawei as well as the entire Chinese chip-making industry.

Source: LTN, September 26, 2020
https://ec.ltn.com.tw/article/breakingnews/3304204

SMIC’s Claim of Having No Military Tie Is Questionable

Taiwanese news site NewTalk recently reported that U.S. Pentagon officials advised that the Trump administration is considering blacklisting Chinese domestic chip maker SMIC due to its ties to the Chinese military. This could cause major damage to the Chinese chip-making industry, since SMIC is China’s largest and the most advanced chip manufacturer. It is also Huawei’s only hope for low-end chip supply. SMIC has issued announcements claiming it has no relationship with the Chinese military. However, according to Mainland media reports, SMIC was the sole manufacturer for the KD5660 Level-A network exchange chip designed by a company named ArmyFly, which is headquartered in Beijing and is dedicated to serving the Chinese military with focuses on army information network and equipment innovation. The KD560 chip even won the highest award issued by the Equipment Development Department of the Central Military Commission. ArmyFly’s customers are all military branches and SMIC, as its award-winning chip supplier, now declares it has nothing to do with ArmyFly.

Source: NewTalk, September 10, 2020
https://newtalk.tw/news/view/2020-09-10/463575

Micron Announced Cut-Off of Supply to Huawei

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that Micron, Huawei’s sole primary memory and flash memory supplier for 20 years, announced compliance with the U.S. ban on Huawei. This is another major blow to Huawei’s supply chain after TSMC’s similar announcement. Micron is the world’s largest semiconductor memory vendor. Micron, Samsung and Hynix together own 95 percent of the world’s DRAM market. Micron is also one of the six vendors that together hold 99 percent of the world’s NAND flash memory market. The only hope Huawei has now is to obtain domestic support from Yangtze Memory Technologies for NAND, ChangXin Memory Technologies (CXMT) for DRAM, and Jinhua Integrated Circuit (JHICC) for DRAM. However, the U.S. already banned JHICC in 2018, due to a lawsuit that Micron filed for unauthorized use of intellectual properties. Yangtze Memory’s manufacturing process depends heavily on high-end equipment like the mask aligners from the Netherland’s SAML, which also uses U.S technology. If the U.S. blacklists the other two Chinese domestic suppliers, Huawei will face a death sentence on the memory side too, in addition to the central processing chips.

Source: NetEase, September 2, 2020
http://dy.163.com/article/FLJ48FM70517M7S3.html

Google and Facebook Gave Up on Hong Kong Submarine Cable Plan

Well-known Chinese news site Sohu (NASDAQ: SOHU) recently reported that the Google and Facebook joint venture plan of laying new submarine cable now officially dropped the U.S.-to-Hong Kong segment. The two quickly adjusted and submitted a new plan to connect with the Philippines and Taiwan. The adjusted pacific fiber cable plan eliminated the earlier partner named Pacific Optical Data Communications, headquartered in Hong Kong. The move was in response to the objection from multiple U.S. government organizations, including the FCC and the Justice Department, as well as several U.S. national security agencies. In April, Google obtained a six-month temporary permit to proceed. The new plan is the official amendment to the original application. The FCC confirmed the national security concerns. Google validated the report and ensured the public that the application is going through the proper channels for final approval. A Facebook representative encouraged people to check the official FCC filing information for more details.

Source: Sohu, August 30, 2020
https://www.sohu.com/a/415573819_99956743

SETN: Indian Government Is Silently Removing Huawei

Sanlih, one of the primary Taiwanese TV stations, recently reported that, with the worsening of the China-India relationship, the movement inside the Indian government to eliminate Huawei’s presence in India has been expanding quietly. Although India has not officially announced a ban on Huawei and ZTE, yet multiple central government ministers have been telling the Indian domestic telecommunications companies to avoid deploying equipment made in China, including 5G network equipment. A high-ranking executive from India’s top communications service provider said the government has already blocked all Chinese bidders from having access to India’s 5G network tests. “It’s now very clear – it’s game over,” said this anonymous source. India is the world’s second largest mobile telecommunications market, with 850 million users. Huawei was established as a major supplier for all three of India’s top telecommunications providers. If the government were to ban Huawei, it would be a massive setback for Huawei. Another government source suggested that India may not issue an official ban to avoid angering China; however, the Modi administration has been “on high alert.”

Source: SETN, August 25, 2020
https://www.setn.com/News.aspx?NewsID=802871

TechNews: Huawei Urges Suppliers to Ship before the U.S. Ban

Taiwanese technology news site TechNews recently reported that Huawei has lately switched to “survival mode” and is trying to establish a large enough chip stock before the U.S. ban takes effect on September 14. According to sources familiar with the matter from among Huawei’s key Taiwanese suppliers, namely MediaTek, Realtek, Novatek and RichWave, Huawei has been calling suppliers at 4 AM in the morning or setting up midnight teleconferences urging them to sending shipments. Samsung, SK Hynix, and even optical lens manufacturers are also rushing their shipments due to the fact that all these vendors use U.S. technology. In some cases, Huawei obtained agreements from suppliers to ship half-made products or products that have not yet passed the quality assurance (QA) processes. However, one of the largest Huawei suppliers, MediaTek, issued a statement clarifying that they will not ship any products without QA. Some companies declined to comment on the inquiry.

Source: TechNews, August 26, 2020
https:// technews.tw/2020/08/26/huawei-in-survival-mode-as-suppliers-race-to-beat-us-deadline/