Japan's semiconductor export ban spread to China's domestic equipment to meet opportunities

On May 23, the Japanese government issued export control measures for semiconductor manufacturing equipment, including 23 categories such as chip manufacturing equipment, and the new rules will come into effect on July 23.

Economic Observer reporter Shen Yiran On May 23, the Japanese government introduced export control measures for semiconductor manufacturing equipment, including chip manufacturing equipment and other 23 categories under export management. The new regulations will come into effect on July 23.

There are still two months left.

On May 31, a domestic fab person told reporters that many fab people did not suddenly realize that Japanese equipment also had huge risks until the ban. The U.S. ban on semiconductors has long led the industry to focus on assessing the risks of U.S. equipment when building factories, with fewer Japanese risks, and even some people will increase the replacement of U.S. equipment to Japanese and Korean equipment, including the purchase of Japanese equipment from overseas second-hand markets.

China is the world's largest semiconductor market and the largest export market for Japan's semiconductor industry. Japan's semiconductor advantage lies in production equipment and raw materials, with annual exports to China exceeding US $10 billion.

Compared with the design of terminals and chips, chip manufacturing is the short board of China's semiconductor industry. Chen Yan, executive director of the Japanese Enterprise (China) Research Institute, told reporters that this export control is Japan's most stringent and comprehensive in the semiconductor field. Compared with the export control measures such as the entity list implemented by the United States on China, Japan's measures have more impact on the foundation of industrial development, because American enterprises are good at chip design and finished products, while Japanese enterprises are good at chip production equipment and raw materials.

A domestic fab source told reporters that the 23 semiconductor equipment covered by the list are mainly used for the front-end production of semiconductors, that is, the process of completing circuit processing on a blank silicon wafer, and the subsequent packaging tools are not included. From the description of the equipment, it can be seen that they are the best parts of Japanese enterprises, but they do not cover all the production. Usually, a wafer production line requires about hundreds of semiconductor machines.

Although the list does not specify the process nodes to which the equipment is applicable, the reporter learned from the relevant lawyers and fab personnel, but from the description of the specific equipment, as well as from the items restricted by Japan in the past, it points to the equipment required for advanced process semiconductors. The industry usually divides chip manufacturing into advanced and mature processes with 14nm as the dividing line. The smaller the process, the more advanced the process.

For Advanced Semiconductors

This time, 23 semiconductor-related categories are listed as controlled objects, including 1 heat treatment equipment, 3 cleaning equipment, 4 lithography/exposure equipment, 3 etching equipment, 1 test equipment and 11 thin film deposition equipment.

According to the public information, among the above-mentioned 23 types of equipment, the production of lithography equipment is mainly Nikon and Canon, and the glue development equipment, dry etching equipment and deposition equipment are mainly Tokyo Electronics.

In terms of equipment, according to the VLSIResearch survey of the U.S. semiconductor industry research company, seven companies in Japan are listed as the world's top 15 semiconductor equipment manufacturers in 2020. China has always been an important source of income for Japanese semiconductor equipment manufacturers.

Qunyi Securities analysis, the list in the lithography machine to limit ArFi and more advanced process equipment, other equipment as a whole corresponding to the process process 14nm and below. CITIC Securities analysis, in the limited 4 lithography equipment involving EUV,EUV lithography machine (only the Netherlands ASML to provide) procurement of domestic long-term restrictions, so Japan's restrictions on EUV ancillary products has no real impact. But at the same time, ArF immersion lithography machine Japan Nikon has related products are also restricted, the future need to observe the actual issuance of permits.

According to the above-mentioned fabs, there are at least hundreds of fabs built across the country, and not many are really engaged in advanced semiconductor production. At present, mature process production lines will not be affected for the time being, and the expansion of enterprises with advanced process production capacity will be affected to a certain extent. There are about 4-5 fabs in China, and each enterprise has more than one advanced semiconductor production line.

Break through the original export control framework

Japan has been implementing export control policies in the field of semiconductors. At the same time, Japan is also a member of the Wassenaar Arrangement, and its semiconductor equipment is also subject to the corresponding export control coordination arrangement. Zhao Deming, partner of the Shanghai branch of Beijing Global Law Firm, said that since most of the above-mentioned equipment and devices have not yet been included in the list of dual-use items under the Wassenaar Arrangement, for example, many thin film deposition equipment are not included in the list. Category 3 "Electronic Products", it can be seen that this has completely broken through the framework of the multilateral Wassenaar Arrangement and is a unilateral and economic strategic confrontation.

The control measures are not specific to China, but to all regions. Zhao Deming said that in essence, Japan, like the United States, has a list of export control countries. For so-called friendly countries, it is exempt from applying for a license. For other countries (including China, Japan implements a military embargo policy against China), it needs export licenses. In view of China's huge import demand, it can be seen that this control is very targeted to China.

Zhao said that according to Japan's Foreign Exchange and Foreign Trade Law and its regulations, violating relevant export control regulations and exporting controlled items or technologies without permission may be subject to criminal penalties, administrative penalties or warnings depending on the severity of the circumstances.

Criminal penalties mainly include fixed-term imprisonment, with a maximum fine of 1 billion yen for companies and 30 million yen for individuals. If the aforementioned fine is less than five times the illegal items, the penalty shall be five times; the administrative penalty is that the offender may be prohibited from engaging in export activities within three years; in addition, the Ministry of Economy, Trade and Industry of Japan may issue a public warning to the offender if it deems appropriate.

Many Chinese and Japanese enterprises have long-term purchasing relationships. Does the scope of the new regulations cover equipment and equipment maintenance that have been purchased in the past?

In this regard, Zhao Deming said that the new regulations themselves do not clarify this issue, but we have noticed that some news has revealed that the tripartite semiconductor export control agreement of the United States, Japan and the Netherlands plans to include after-sales maintenance links in the scope of control, that is, it is not allowed to provide maintenance services for products shipped to China before the rules take effect.

Zhao Deming said that from the perspective of the regulatory logic of export control, export control refers to the cross-border transfer of controlled items (including commodities, technologies, software and services). After the new control takes effect, unless there are exceptions, activities involving maintenance and repair services of controlled items may constitute controlled technology exports under Japan's export control system and are usually subject to export control, regardless of whether the export of the product required for maintenance is prior or subsequent. However, for specific repairs, Japanese manufacturers can theoretically apply for a license. The success of the application depends on the Japanese government's international policy considerations and specific policy grasp, which may change at any time.

However, it should also be noted that Japan, like the European Union, does not have strict "re-export" controls in the sense of U.S. export controls and controls on items produced outside Japan (foreign-produced items), while for foreign enterprises and individuals, only in accordance with the end-user blacklist system. Therefore, for enterprises in China, for semiconductor items of Japanese origin, objectively there is not no supply chain channel at all, but the channel may be narrower. The more critical issue is still the after-sales maintenance after the import of items, which will test the political and economic wisdom of all parties.

Chen Yan believes that this export control will have a long-term effect on the semiconductor industry in China and Japan and even in the world. Japanese semiconductors also follow the law of scale effect and long return cycle. Losing part of the Chinese market will slow down the speed of Japanese enterprises to recover R & D costs. Then each generation of equipment investment will lengthen and the speed of technological innovation will also slow down.

Domestic opportunities

Chip manufacturing is the short board of China's semiconductor industry. Manufacturing is divided into front-road and back-road links. In contrast, China's localization process on front-road equipment is weaker, and all the restricted Japanese equipment comes from the front-road link.

Dong Wu Securities analysis, revenue caliber, 2022 11 semiconductor equipment enterprises to achieve a total operating income of 37.6 billion yuan, an increase of 53% YoY, corresponding to the semiconductor equipment market overall localization rate of about 22%. In terms of sub-sectors, domestic semiconductor equipment companies have achieved a certain market share in cleaning, heat treatment, CMP, etching equipment and other fields. However, for lithography, measurement/detection, glue development, ion injection equipment and other fields, the estimated 2022 localization rate is still less than 10%, domestic substitution space is larger.

According to soochow securities data, in 2022 the domestic Huahong Wuxi plant a variety of equipment bidding overall localization rate of less than 20%. The list of thin film deposition equipment localization rate of 10%, detection and measurement equipment 2%, lithography and coating development equipment is 0.

But there are still a few companies in the field to make the results. Core source micro focus on domestic glue development equipment, the company said that the former glue development equipment has been completed in the wafer processing link 28nm and above process nodes full coverage, and sustainable to a higher process level iteration.

The etching equipment of the company has achieved 5nm nodes. North Huachuang's business covers a number of listed equipment, including etching equipment, thin film deposition equipment, heat treatment equipment, cleaning equipment. In 2022, the company's electronic process equipment revenue was 12.1 billion billion yuan, with a gross profit margin of 37.7, up 4.7 percentage points from the previous year.

A person engaged in semiconductor consumables told reporters that the ban will speed up the process of domestic substitution to a certain extent. For example, customers will strengthen the bidding or alternative of domestic products to provide some opportunities. But compared to the chip itself, the chip in the equipment and consumables on the domestic substitution is actually a more difficult process, here to follow the winner-take-all industry law, customer business is very sticky, many local fabs over the years and overseas suppliers have reached a strong binding relationship.

The person said that for a new supplier, the customer has to bear more risks than benefits, the product needs to be constantly iterated, it takes a lot of time and money to try and make mistakes, and some even provide R & D funds to the supplier, so it is difficult for latecomers to catch up. Some domestic enterprises have technically reached the customer standards, but they make spare parts all the year round, and at most they supply them in small batches, and it is even difficult to get the opportunity to try them out.

The International Semiconductor Industry Association expects global wafer fab equipment spending to be about $92 billion in 2024, up 21% year-on-year. According to the law of the industry, the fab will enter a production expansion cycle next year, and the demand for semiconductor equipment will also increase. The external ban will force the development of domestic products, giving domestic equipment manufacturers more opportunities to enter large factories, but due to the industry's own experience and customer stickiness, the process of replacing equipment manufacturers is a painful period for fabs and end users.

This article source economic observer, such as infringement please contact us immediately delete