China Backdoors US Chip Sanctions, Buys Used Banned Equipment

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Used or new, does not matter.

Intel
(Image credit: Intel)

As the U.S. government is gearing up to put even stricter constraints on the Chinese semiconductor sector, China-based chipmakers are accelerating their purchases of wafer fab equipment (WFE) to ensure the continuous operation of their fabs. However, Chinese companies prefer to keep these transactions under the radar as some violate U.S. sanctions, reports DigiTimes.

Companies like SMIC, HuaHong, Nexchip, and Silan Microelectronics are buying everything they can, including second-hand tools, according to the story that cites anonymous industrial sources. Some of the WFE they procure cannot be shipped to China as this would violate the U.S.-imposed sanctions, which is precisely the reason why parties prefer to keep such purchases low profile.

Interestingly, even Huawei — which is under severe sanctions by the U.S. government and legally cannot procure anything containing advanced U.S. technology without permission — is stepping up purchasing wafer fab tools. Perhaps, as it is prepping to build a fab with SMIC, it wants to get as many tools as possible.

Chinese companies cannot procure tools for making 14nm-class chips and those using more advanced fabrication technologies. Meanwhile, only SMIC can produce chips on such sophisticated nodes, so for most Chinese chipmakers, existing restrictions aren't as dire. Yet, the U.S. government is working with its peers in Japan and the Netherlands to put even stricter curbs on Chinese semiconductor makers. This is why foundries and integrated design manufacturers are accelerating their orderings.

At this point,  nobody knows what kind of wafer fab equipment the U.S. government wants to ban from exporting to China. As a result, Chinese foundries and IDMs seem to buy virtually everything that can be useful for their expansion and/or maintaining their current operations. 

For SMIC, it is essential to purchase both advanced and mature tools as it produces chips using a wide variety of manufacturing processes. For companies like HuaHong and Nexchip — which specialize in mature production technologies — getting even outdated and/or used equipment is a must to keep their fabs running.

Among the beneficiaries of stricter sanctions against Chinese semiconductor companies will be Taiwanese makers of fab equipment, the report says. Some already see orders from China extended until 2024 and even 2025.

 

Anton Shilov
Anton Shilov
Contributing Writer

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

14 Comments Comment from the forums
  • USAFRet
    Preemptively - No politics, no conspiracy, no insults.

    Unless you personally want to get banned.
    Reply
  • vanadiel007
    In the end, who this is really hurting are the consumers. Prices of anything that uses chips, from cars to electronics, is rising sharply while every Company that uses these chips is posting healthy profits.

    It would likely be cheaper for consumers to simply give x amount of money to x amount of companies and get back to the "old ways" when chips were abundant and things were more affordable.
    Reply
  • Fates_Demise
    USAFRet said:
    Preemptively - No politics, no conspiracy, no insults.

    Unless you personally want to get banned.
    Um.. dude the entire article is based on political issues.
    Reply
  • USAFRet
    Fates_Demise said:
    Um.. dude the entire article is based on political issues.
    um, dude.....left long enough (like an hour or so), and the political comments will descend into mudslinging, conspiracy theory, and total falsehoods.

    My comment was a preempttive warning, in an attempt to keep things in check.

    It won't work, but I had to make the attempt.
    Reply
  • -Fran-
    vanadiel007 said:
    In the end, who this is really hurting are the consumers. Prices of anything that uses chips, from cars to electronics, is rising sharply while every Company that uses these chips is posting healthy profits.

    It would likely be cheaper for consumers to simply give x amount of money to x amount of companies and get back to the "old ways" when chips were abundant and things were more affordable.
    There is a lot of what you're saying and I don't disagree, but there's also another side which is complexity and pure demand of "silicon".

    Now, in everyone's day to day life, there's plenty of completely unrelated things which are in need of chips of different kinds and processing capabilities: things that used to use one chip, now probably use a board full of them or require a more complex chip... Most of those, while don't need to be in the latest nodes, still need to be manufactured somewhere. This demand has increased over the years to a point where it's probably a handful of Companies that can provide the tooling for such a task (ASML being the main one from memory).

    Leaving all the baggage of history and politics on the side, it's more than just Companies being greedy why the prices have gone up a lot, I'd say.

    The only way would be to have some tangible breakthroughs in other manufacturing or processing type.

    Regards.
    Reply
  • rluker5
    It seems like a lot of sanctions are getting backdoored.
    That sounds worse than I intended, but if you check the reviews from online stores not based in the west, stuff seems to be getting sold to whomever wants to buy. And that's just the stuff plainly out in the open.

    But at least the large companies are still listening to those making the sanctions for now.
    Reply
  • vanadiel007
    -Fran- said:
    There is a lot of what you're saying and I don't disagree, but there's also another side which is complexity and pure demand of "silicon".

    Now, in everyone's day to day life, there's plenty of completely unrelated things which are in need of chips of different kinds and processing capabilities: things that used to use one chip, now probably use a board full of them or require a more complex chip... Most of those, while don't need to be in the latest nodes, still need to be manufactured somewhere. This demand has increased over the years to a point where it's probably a handful of Companies that can provide the tooling for such a task (ASML being the main one from memory).

    Leaving all the baggage of history and politics on the side, it's more than just Companies being greedy why the prices have gone up a lot, I'd say.

    The only way would be to have some tangible breakthroughs in other manufacturing or processing type.

    Regards.

    Apparently we still have major global supply chain issues, well after 2 years of the start of the global supply chain issues.
    There does not seem to be a huge rush in addressing those supply chain issues, and I think that is partially due to the opportunities low supply provides for those who sell such supplies.

    If I would run a supply chain company I would be in no rush either since there would be good money in it for me.
    But in the end it's hurting the consumers and it does not look to me like companies care about that.
    Reply
  • If they hurt the consumers enough, there will be a huge backlash

    personally, I don’t want all these cars with all this gobbledygook inside them. I want them fixable by an average Joe mechanic. I don’t want chips in my cars. I don’t want chips in my appliances. I don’t want chips in my anything except my computer and phone and tv
    Reply
  • bit_user
    vanadiel007 said:
    while every Company that uses these chips is posting healthy profits.
    Oh, really? Care to give some examples?

    vanadiel007 said:
    It would likely be cheaper for consumers to simply give x amount of money to x amount of companies
    First, I'm not sure it would be cheaper, since the amounts of money we're talking about are potentially big even by comparison with the US CHIPS act. Second, it misses the point of the sanctions, which I guess we're not allowed to discuss.
    Reply
  • bit_user
    Mandark said:
    personally, I don’t want all these cars with all this gobbledygook inside them.
    If your car is less than about 35 years old, it definitely has chips inside of it. And I don't just mean in the radio.

    Microelectronics is completely ubiquitous. It's involved at multiple points even in the production and manufacturing of everything you buy. Banning chips really means going back in a time warp to the 1970s, except the tech of that era would be creaking under the strain of current populations and density and the result would probably plunge us into an economic depression.

    Mandark said:
    I want them fixable by an average Joe mechanic.
    You just need a different kind of mechanic. The DIY repair movement has shown that people can fix a lot of the electronics we use today.

    And even without chips, your "average Joe mechanic" mostly just swaps parts. They might swap in a rebuilt alternator, but they don't refurbish it themselves - that's done by a specialist. Heck, the guys who fix my car won't even rebuild brake calipers - and they're pretty good.
    Reply