Disclaimer: The content of this article is sourced from online information compilation. I strive for but do not guarantee absolute accuracy and completeness; it is for learning and communication purposes only and does not constitute any investment advice!
Event: The bipartisan members of the U.S. House of Representatives’ “China-U.S. Strategic Competition Special Committee” released an important report on semiconductor export controls related to China after months of investigation. The report believes that there are loopholes in the restrictions imposed by the U.S. and its allies on China’s advanced process construction, allowing China to purchase nearly $40 billion worth of cutting-edge chip manufacturing equipment. For example, in 2024, 44% of Tokyo Electron’s revenue will come from China, 42% from Lam Research, 41% from KLA, and 36% from ASML and Applied Materials.
Key Points: The approach to tackle the semiconductor supply chain will be similar to that used against computing power chips, focusing mainly on equipment. This includes further expanding the scope of controls to the “non-advanced” equipment sector, utilizing tracking technology, and restricting allied countries from using Chinese equipment, mirroring the methods used against computing power:
1) A broader export ban on equipment for all of China is proposed, including equipment used for manufacturing “basic” and “advanced” chips.
2) More Chinese semiconductor companies will be added to the entity list, including manufacturers of logic chips at 45nm and below.
3) Installation of tracking technology to prevent equipment from being transferred to restricted entities.
4) Prohibit any foundry using U.S. and allied equipment from simultaneously using Chinese-made semiconductor equipment to prevent Chinese equipment from infiltrating the global supply chain.
If this report truly becomes an export control regulation, the first to go crazy will not be us, but the three semiconductor equipment manufacturers in the U.S… Whether ASML and TEL will go crazy depends on the terms.
# Strengthening Export Controls Among Allies
The core is to implement a “long-arm jurisdiction” policy. The U.S. believes that semiconductor equipment companies in the Netherlands and Japan that use U.S. technology should be subject to U.S. export control regulations. The focus is on filling the gap left by the ban on U.S. equipment with supplies from allied countries, such as TEL. Implementation is challenging, and the margins are tightening.
# Expanding the Scope and Subjects of Restrictions
The targets of restrictions will expand from companies on the entity list to the entire country, and the scope will extend from advanced (14nm and below) to basic (40nm and below). The main goal is to prevent companies on the entity list from obtaining restricted equipment through proxies.
The impact is significant, but the execution difficulty is high. If enforced strictly, the long-term prospects for domestic equipment companies will be greater, and the urgency for GKJ will be stronger (mentioning the need to ban old DUVi, we speculate this refers to the 1980i series and below).
# Restricting fabs using U.S. and allied equipment from using Chinese equipment
The main goal is to prevent Chinese equipment from entering the international market. The impact is relatively weak; in the short term, such a large market in China is already sufficient for domestic equipment manufacturers to grow. In the long term, it will be difficult to constitute substantial barriers under market choices.
# Restricting Exports of Key Semiconductor Components
The report points out that in the future, there will be regular assessments of which key components belong to the “choke point” category and will gradually be included in the export restriction list. This is a long-term marginal benefit for domestic equipment component manufacturers, accelerating the localization process.
In summary, the core remains to prevent companies on the domestic entity list from using mature equipment to manufacture advanced chips.
If enforced strictly, the urgency for domestic semiconductor equipment companies to break through in the short term and their long-term potential will both increase, and equipment companies are expected to undergo a value reassessment.