A cutthroat Sino-U.S. chip war
이 글자크기로 변경됩니다.
(예시) 가장 빠른 뉴스가 있고 다양한 정보, 쌍방향 소통이 숨쉬는 다음뉴스를 만나보세요. 다음뉴스는 국내외 주요이슈와 실시간 속보, 문화생활 및 다양한 분야의 뉴스를 입체적으로 전달하고 있습니다.
Lee Sang-ryeol
The author is an editorial writer of the JoongAng Ilbo. The U.S.-China tech war is heating up again after Huawei Technologies released the Mate 60 Pro in August. Huawei announced that the 5G smartphone is powered by 7-nanometer chips developed by the Semiconductor Manufacturing International Corporation (SMIC), China’s top foundry player. The United States strictly restricts exporting technology or equipment needed to produce under-14-nanometer chips to China. But China apparently succeeded in developing the cutting-edge chips in the face of U.S. restrictions. Interestingly, the chip development coincided with the alarming news that Beijing banned public servants and employees of state-owned corporations from using Apple iPhones.
Was it just a coincidence? Huawei’s Mate 60 Pro hit the market while U.S. Secretary of Commerce Gina Raimondo was on her trip to China from Aug. 27 to 30 to restore Sino-U.S. economic relations. The Mate 60’s release also took place just a few days before the iPhone 15’s release on Sept. 12. The puzzling synchronization foreshadowed a looming controversy over the efficacy of U.S. sanctions on China, the need for additional sanctions, and a possible change in Apple’s China business.
Whether Huawei violated U.S. sanctions to apply the 7-nanometer lithography in its new smartphone remains to be seen. The sanctions were intended to control the export of up-to-date chip equipment to disallow China from obtaining it. The 7-nanometer process of Samsung Electronics and Taiwan’s TSMC, the foundry juggernaut, employs the extreme ultraviolet (EUV) lithography equipment currently monopolized by ASML, a Dutch chip equipment maker. The EUV lithography equipment is used in printing integrated circuits on silicon wafers.
The EUV equipment has not been exported to China since 2019. But the deep-ultraviolet (DUV) lithography equipment also can draw 7-nanometer-level patterns on wafers. Instead, it requires a series of duplicate processes: the “multi-patterning” technology developed by Taiwan’s TSMC in 2017. Chip experts suspect that SMIC — the largest foundry in China — embodied the 7-nanometer process by repeatedly executing the DUV lithography. The United States also tried hard to block the DUV equipment from entering China and drew support from the Netherlands and Japan. But the import restrictions on the Dutch will be enforced from 2024. China hurried to get the equipment before the restriction.
According to the South China Morning Post, China purchased $2.6 billion worth of the DUV equipment from ASML, the Dutch company, from January through July this year — a 65 percent increase on year. China also bought a large amount of used DUV equipment, as U.S. sanctions were confined to new DUV equipment. In that sense, China may have taken advantage of such loopholes rather than violating the U.S. sanctions. Bloomberg came up with the intriguing assessment: “Huawei chip shows U.S. curbs are porous, not useless.”
The DUV lithography has major drawbacks, including high cost from redundant works and low production yield. A Reuters report placed the production yield of SMIC at lower than 50 percent. An apparent lack of profit suggests the need for Beijing to massively subsidize the company.
Since the structural weakness of the sanction was found, the United States is expected to respond more sternly. On Sept. 6, Rep. Mike Gallagher, chairman of the House Select Committee on China, demanded that the U.S. Commerce Department end all technology exports to both Huawei and SMIC, following the discovery of new chips in Huawei phones, which may violate trade restrictions. President Joe Biden’s administration is preparing a final version of its control on chip technology transfer to China. The Financial Times quoted an industry expert to suggest the possibility of the U.S. pressuring countries to impose “even greater restrictions than what exist today” against China.
The Chinese government did not officially ban using iPhones, as the decision was reportedly delivered through business meetings or online chat rooms. Given Apple’s unchallenged reputation as Americans’ pride, repercussions of the ban, albeit unofficial, on using iPhones are not small. The timely release of Huawei’s Mate 60 reflects the company’s intention to eat away at the high-end market dominated by Apple in China. In a dramatic turn, China became the largest single market for iPhone sales in the second quarter after the country’s share of the market “surged to an impressive 24 percent, overshadowing America’s 21 percent share,” according to an analysis by TechInsights, an information platform for the chip industry. The secret lies in the premium segment. The biggest beneficiary of Washington’s technology export control was Apple. Apple’s share of high-end smartphones priced over $600 in China soared to 70 percent in 2022 from 56 percent in 2019. In the meantime, Huawei’s share fell to 11 percent from 39 percent. The time has come for Huawei to reverse it.
The Wall Street Journal showed an analysis that Huawei’s top-caliber smartphone production could end up slashing iPhone production by 10 million units, which account for 4.5 percent of Apple’s total iPhone production last year. If China’s ban on iPhones extends to the private sector, it will certainly affect Apple. But others disagree. In 2021, China banned employees of state-run companies from using Tesla’s electric vehicles, but Tesla’s business in China was not affected, they say. China’s intense recession is another variable. If the ban on iPhones leads to Apple’s production reduction, it will certainly worsen China’s unemployment crisis. The factory of Foxconn, an Apple smartphone assembler, currently hires more than 1.2 million Chinese workers.
Investors’ pressure on Apple to lower its reliance on its China business will be fiercer. The company moved some of its iPhone production lines last year in the wake of the Covid-19 pandemic. The way Apple manufactures the phone will also change toward the direction of assembling parts from around the globe at a few strategic bases like India and Vietnam, Bloomberg says.
But it can hardly solve the challenges for Apple. U.S. companies are paying close attention to China’s mounting pressure on Apple, an American company friendly with Beijing. The Wall Street Journal wondered who could avoid the bullet between the U.S. and China if Apple cannot.
In her meeting with Chinese officials, the U.S. commerce secretary brought up the issue of China’s Anti-Spy Act and arbitrary search and seizure on American enterprises doing business in China. She conveyed their frustrations at Beijing’s regulations stifling enough to dissuade investments in China. The foreign direct investment in China plunged to $4.9 billion in the second quarter — a whopping 87 percent drop from 2022 and the lowest since 1998. If U.S. companies’ departure from China reaches a serious level, it will trigger a successive rebuilding of global supply chains.
Huawei’s release of 5G smartphones during the U.S. secretary’s trip to China — and Beijing’s ban on iPhones — hints at a slim possibility of Washington and Beijing rushing to stop the tech war on an appropriate level. The standoff is being fueled by the two countries’ domestic political situation.
The presidential race has already started in the United States. Biden takes pride in preventing China from rising with semiconductors again. The Democratic and Republican parties are no different about the need to block China’s ascension. But China cannot step back. President Xi Jinping succeeded in extending his presidency to the third term, but must address the public’s disgruntlement about a deepening economic slump and joblessness. Here, sophistication of China’s chip technology amid the United States’ technology blockade can turn the tables by inciting patriotism among the Chinese. Next year’s presidential election in January in Taiwan also calls for internal unity in China, as seen in Reuters’ forecast of a tougher Sino-U.S. tech war.
The U.S.-China clash and America’s rebuilding of global supply chains will have a serious impact on the Korean economy, starting with Samsung Electronics’ and SK hynix’s chip factories in China. The United States enforced a ban on exporting chip production equipment to China last October, but exempted Korea from the ban for one year after conceding to the argument that Samsung and SK’s continued operation of their chip factories in China rather helps curb China’s rise in semiconductors. Will SMIC’s embodiment of the 7-nanometer process change Beijing’s mind? On its part, Seoul must urgently draw up an elaborate strategy to brace for ominous ramifications of the tech war between the U.S. and China.
Copyright © 코리아중앙데일리. 무단전재 및 재배포 금지.
- Canada remembers Incheon landing and its evolving role in the Indo-Pacific
- A cutthroat Sino-U.S. chip war
- Gaya Tumuli make Unesco's World Heritage list
- Yoon criticizes North Korea-Russia military cooperation
- 'Love After Divorce' returns for fourth season with U.S. contestants seeking love in Cancun
- Mamamoo's Hwasa attends police questioning after being sued for alleged public indecency
- Korean Air serves coffee with glass shard to passenger, report says
- SK Broadband, Netflix settle dispute, forge partnership for new service
- Chinese giant Alibaba emerges as front-runner to acquire 11st
- BTS's V shatters records with 2.1 million first week album sales