Madness is doing the same thing over and expecting different results, and China is throwing money at semiconductors again.
China has launched a massive $47 billion fund, the largest in its history, to bolster its semiconductor industry and establish a local supply chain. This fund, equivalent to 344 billion yuan, is the third phase initiated by the China Integrated Circuit Industry Investment Fund [also known as the National Integrated Circuit Industry investment Fund Company (ICF), or just “Big Fund.”-LP]. It’s worth noting that this amount is twice the total funds raised in the previous phases in 2014 and 2019.
Do you remember the last time I covered where the money went to in those previous phases? The money went to companies like Wuhan Hongxin Semiconductor Manufacturing Co. Result? “Hongxin’s unfinished plant in the port city of Wuhan now stands abandoned. Its founders have vanished, despite owing contractors and investors billions of yuan.”
Or maybe Tsinghua Unigroup. Result? The arrested a whole lot of executives, a lot of money disappeared into various pockets, and “Tsinghua Unigroup abandoned its plan to build DRAM memory chip manufacturing plants in Chongqing and Chengdu in southwest China earlier this year.”
As I wrote before, China’s semiconductor industry is shell games all the way down.
At lot of times, loans and investments are siphoned through four or five different entities from the purposes for which they were originally obtained. Everyone’s trying to get rich, and they hope to survive on smoke and mirrors long enough to get profitable. Imagine if Kleiner Perkins invested $25 million in a software startup, only to find that money was spent on a noodle shop, a used car dealership and a golf club manufacturer.
Sometimes it works. You can build a company on margin, get profitable quickly, and be paying off investors and contractors before anyone realizes how shaky the entire enterprise is.
But you can’t do that with semiconductor manufacturing. The startup costs are simply too high, easily in the billions. Very, very few companies can afford to be in a game that expensive. China’s two biggest semiconductor manufacturing success stories, SMIC and Tsinghua Unigroup, all have have CCP direct government investment.
And bunches of Tsinghua Unigroup executive still got pinched for sticking their snouts into the trough.
And everything should theoretically be harder now that the U.S. has imposed sanctions on China’s semiconductor industry. But one wonders just how effective these sanctions are when Applied Materials reported that 43% of its total revenue came from China in the second quarter. That suggests a certain kayfabe quality to the sanction, with just the right loopholes for AMAT (and presumably other semiconductor equipment manufacturing giants like Lam Research and Tokyo Electron) to keep getting those conveyor belts of Chinese money.
My assumption is that, yet again, the funds earmarked for semiconductor companies will be siphoned off into a thousands unrelated pockets. (Though the rest of China’s business climate is sucking so badly that maybe some money will actually fund real semiconductor startups, if only through lack of other money-making opportunities to siphon funds off for.) Sanctions will continue to leak. A few years from now, China will announce the arrests of more executives using the Big Fund to play more investment shell games. And five years from now China will announce an even bigger set of subsidies…
Tags: Applied Materials, China, Communism, Economics, Foreign Policy, fraud, National Integrated Circuit industry investment Fund Company (ICF), sanctions, Semiconductors, subsidies, technology
The ChiComs have reacted strongly to the 2021 National IC Investment Fund corruption scandal and appear to have changed their overall IC support methodology. No longer will they invest in IC production facilities directly. They will primarily invest in the manufacture of IC production machinery. Their secondary focus will be research in and development of IC production technologies. Direct investment in private chip foundries will be curtailed.
The ChiComs have prioritized four IC production technologies for R&D:
1) Electronic design automation (EDA) tools.
2) Lithography, etching, and deposition.
3) Materials, such as process gases, photoresists, and the critical inputs including ABF, TGV, and TSV.
4) Chiplet design and advanced packaging technologies,
The ChiComs have also established a new semiconductor industry ‘leading small group’ under Vice Premier Ding Xuexiang which will funnel all future assistance to the IC industry through a single SOE. This is expected to reduce/eliminate corruption in the future.
That just means the scam will shift from fake building fabs to fake building semiconductor equipment factories, then to building semiconductor equipment that mysteriously won’t work as well as advertising.
Etching and Deposition? They can probably do that, though the learning curves on tight tolerances for process controls will probably be quite painful, even with western tech to dissect.
Lithography? Hell no. EUV litho machines are insanely complex. So complex that no one but ASML has been able to make a go, and that includes longtime players like Cannon. Applied Materials should have sunk money into building out a litho offering way back during the dotcom boom rather than throwing money down the drain on direct to public TV advertising. Since they can’t import an ASML machine to steal the tech from, I would say that the chances of China replicating that insane tech is pretty much zero.
Forced-draft anything rarely works out, over the long haul.
Do a quick compare/contrast between the Soviet efforts during the 1920s and 1930s. Despite spending all that stolen wealth and starving millions to get it, they never developed a truly organic industrial infrastructure. They’re still having to buy modern industrial equipment from vendors in the West, exactly as they did back then. Where are the Russian machine tool makers, the Russian factory designers and all that? They never existed, because they took the cheap and easy shortcuts, never developing true organic capacity for much of anything. Even given the massive theft of German and Eastern European industrial plant, they’re still operating without the capacity to build their own to this day. Possibly, because of those thefts.
As an amusing anecdote, I have a friend who is a serious optics nerd. When the Russians opened up to the West around 1990, he went nuts at the prospect of having access to all the great Russian optics he was sure existed, and thought that he’d set himself up in business exporting that stuff to the West, thinking it would be more affordable.
What he discovered was that the vast majority of that gear was produced on machinery stolen from the Germans and the Czechs, that said machinery was worn out, and that the workers in those factories were elderly and apathetic beyond belief. There was also nothing in the pipeline behind them, for unknown reasons. The German gear stolen from Leica and the other companies relied on a tradition of craftsmanship and apprenticeship that didn’t exist in the Soviet Union, and when he got to looking at the reject rate that the Soviets had accepted, along with the costs? He gave it up as a bad job, and said “F*ck it… You can’t make money doing this, unless you’re hard up for the foreign exchange and you have an internal captive market…”
Command economies don’t work. Examine the fate of the majority of the things that MITI mandated for the Japanese economy, versus what actually happened. Man is not possessed of the God-like powers of intuition he would have to possess in order to run a modern economy on a command basis. Best you can do is try really hard to dance with the chaos, and try to avoid the various falling anvils…
Think the Chinese are intensively researching and developing BEUV lithography. A step beyond the complex AMSL EUV technology, which has not launched well due to its complexity.
BEUV lithography involves Nd:YAG (neodymium-doped yttrium aluminum garnet) lasers broadcasting on gadolinium (Gd), terbium (Tb), or erbium (Er) targets to perform diffraction lithography at 6.x nm wavelengths. Much simpler proposition than the AMSL tin droplet plasma UV generator.
This is all rare earth technology, which the Chinese are quite good at. It also explains why the ChiComs have embargoed many rare earth elements.
[…] CAPITALISM IS A GRIFTER’S DREAM AND THAT’S WHY JOE BIDEN IS SO FOND OF IT: China Throws Money At Semiconductors Again. “Do you remember the last time I covered where the money went to in those previous phases? […]
ASML is working through a $38 billion backlog of new orders. Clearly this undercuts your dismissive claim about “the complex AMSL EUV technology, which has not launched well due to its complexity.”
The numbers indicate a ready acceptance of EUV litho technology. Is this “complex complexity” too deep to fathom?
EUV lithography machines account for about 10% of AMSL’s sales by dollar volume, but a much higher portion of their backlog because the machines are nightmares to produce and set up. Complexity is only one impediment to AMSL’s EUV sales. These machines are also energy hogs, using GWs of electrical power.
Did you know that TSMC’s EUV lithography fleet uses 10% of all electrical power generated in Taiwan?
Not a good look in our world of power generation opposition by climate change wackos.
All of TSMC is estimated to used 7.2% of Taiwan’s power, so there’s no way Litho alone is using 10% of all power.
“All of TSMC is estimated to used 7.2% of Taiwan’s power, so there’s no way Litho alone is using 10% of all power.”
This is a four year old projection of TSMC’s current consumption which is well off the mark. It didn’t properly account for the expansion of TSMC’s EUV lithography. TSMC consumes well north of 10% of Taiwan’s total electrical generation.
“TSMC consumes well north of 10% of Taiwan’s total electrical generation.”
Oh, look! TSMC reduced the power consumption of its EUV scanners by 24% and plan to reduce costs further by improving energy efficiency per wafer per EUV tool by 1.5x by 2030.
TSMC is a market-driven enterprise; China, Inc. is a bureaucratic entity that is governed by political pressure. Better economic outcomes are obtained by voluntary cooperation under the international division of labor that by command and control systems.
https://www.anandtech.com/show/21402/tsmc-shares-euv-progress-more-tools-more-wafers-best-pellicles-less-power
“Oh, look! TSMC reduced the power consumption of its EUV scanners by 24% and plan to reduce costs further by improving energy efficiency per wafer per EUV tool by 1.5x by 2030.”
From the comments to your hyperlinked article:
“This article doesn’t tell the whole story.
From 2022 to 2023 the [TSMC] wafer output was flat even though EUV tools increased ~30%…”
Do the math and even you will figure out how TSMC “reduced the power consumption of its EUV scanners by 24%”.