U.S. CHIPS Funding Terms Will Severely Restrict Chinese Chips Industry

Wafer
(Image credit: Shutterstock)

As details about requirements for companies that receive funding enabled by the CHIPS and Science Act emerge, it's becoming clear that the act will not only boost the American semiconductor sector, but will also severely restrict investments in the Chinese chip industry by companies that receive money from the U.S. government. This will have drastic effects on Chinese foundries and memory makers, who will lose significant market share.

Wafer fab equipment makers from the U.S. already cannot supply tools that can be used to produce logic chips with non-planar transistors on 14 / 16nm nodes and below, 3D NAND with 128 or more layers, and DRAM memory chips of 18nm half-pitch or less. But the requirements for companies getting funds under the U.S. CHIPS and Science Act mean that these firms will not be allowed to invest in any of their fabs in China, according to a report by TrendForce. This will have a drastic effect on multinational companies like Samsung, SK Hynix, and TSMC, all of whom have large fabs in China and will likely apply for funding under the U.S. bill. 

TrendForce

(Image credit: TrendForce)

As a consequence, says TrendForce, China's share of the DRAM market will decline from 14% in 2023 to 12% in 2025, whereas the country's share on the 3D NAND market will drop from 31% in 2023 to 18% in 2025.

TrendForce

(Image credit: TrendForce)

TSMC has a large fab in China that produces chips on its 28nm-class technologies. The company cannot upgrade this fab to make 16nm FinFET chips. Furthermore, it will not be able to expand the production capacity of its Fab 16 if it gets funding under the CHIPS and Science Act.

TrendForce

(Image credit: TrendForce)

Meanwhile, the U.S. government plans to further tighten its restrictions against the Chinese semiconductor sector and intends to ban imports of equipment that can be used to make chips on 28nm nodes. This will hit not only TSMC, but also SMIC.

Furthermore, TrendForce claims that some fabless chip designers will move existing and new orders to Taiwanese foundries due to client pressure and risk minimization. Foundries like VIS and PSMC, which focus on mature production nodes, have greatly benefited from this trend already, according to TrendForce. The market research firm predicts that this shift will result in significant recovery for affected foundries that are currently affected by inventory adjustments of IC designers.

TrendForce claims that to avoid geopolitical issues, numerous U.S. firms are limiting the production areas for memory and storage products and are asking foundries to relocate their manufacturing plants away from China. TrendForce anticipates a scenario where two different production areas emerge: one consisting of Chinese fabs that mainly fulfill local demand and another consisting of fabs situated outside China that serve other markets.

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.