China's most advanced contract manufacturer, Semiconductor Manufacturing International Corporation (SMIC), lacks equipment for its new factories and is struggling to meet deadlines. This is the second time that SMIC has reported problems; the US trade restrictions are brought into play here.
Hardly any alternative providers to the West
The technologies to equip modern semiconductor factories are not available in China. Import bans by the USA affect, among other things, ASML as the world's largest factory equipment supplier, but also Applied Materials and Lam Research. The most modern lithography systems and tools cannot be purchased with it, so older systems or local alternatives that are not yet affected must be used. But you can't take part in the high-end race with that.
SMIC has been officially on the US ban list since autumn 2020, and the belts have recently been tightened even more. Even getting hold of local machines is becoming increasingly difficult. However, the systems are also scarce for the production of 28 nm chips, which is initially planned as the cornerstone in many plants. China's own technology is far from ready to fill the gap. Shanghai Micro Electronics Equipment (SMEE), which builds lithography systems for 90 nm and larger, is considered the leader. Suitable suppliers are Kingsemi, AMEC or Naura along with a few others such as ACM Research based on LAM Research.
So far, manufacturers in China have been able to rely on ASML, among other things, to continue to deliver. The company had recently come under strong pressure to refrain from supplying conventional exposure systems (DUV). There has been an export ban on EUV systems for years. Other suppliers such as Lam Research have recently been less optimistic. In October 2022, shortly after the new US sanctions came into force, the manufacturer warned that the restrictions on business in China were extremely clear and would cost the group up to 2.5 billion US dollars.
There is a lack of “bottleneck equipment”
In the end it is probably precisely such systems that one side would like to sell and the SMIC now missing. The manufacturer speaks explicitly of “bottleneck equipment”, i.e. very important equipment that acts as a bottleneck in the production chain, without which ultimately nothing works. A postponement of the start of production by one or two quarters is now being cautiously formulated in the hope that the problems can be resolved by then. But the long-term problems are by no means fixed, because it shouldn't get any easier to equip other locations in the future.