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China’s Chip Industry Is Doomed

Monday, September 19th, 2022

This is a story that’s been bubbling on for a while, but it looks like the U.S. government is about to slam down export restrictions on chipmaking equipment.

The administration of US President Joe Biden next month is to broaden curbs on US exports to China of semiconductors used for artificial intelligence and chipmaking tools, several people familiar with the matter said.

The US Department of Commerce intends to publish new regulations based on restrictions communicated in letters earlier this year to three US companies — KLA Corp, Lam Research Corp and Applied Materials Inc, the people said, speaking on the condition of anonymity.

Every wafer fabrication plant in the world uses equipment from one of those three companies. Applied Materials and LAM Research (along with Tokyo Electron) have their fingers in almost all areas of chipmaking equipment (PVD, CVD, Etch, etc.), while KLA (formerly KLA-Tencor) dominates the wafer inspection equipment segment. Add ASML in the Netherlands, and those five absolutely dominate the semiconductor equipment market.

The letters, which the companies publicly acknowledged, forbade them from exporting chipmaking equipment to Chinese factories that produce advanced semiconductors with sub-14 nanometer processes unless the sellers obtain commerce department licenses.

This is where things get tricky. SMIC claims they can do 7nm, but everyone outside China doubts they can do it reliably, repeatably and profitably. SMIC announced they’re about to start manufacturing 14nm, and that they can probably do. Practically, they’re the only semiconductor manufacturer in China that can do sub-14nm, as just about everyone at the top of the next biggest semiconductor manufacturer, Tsinghua Unigroup, just got arrested in July.

There’s even talk that they’re actually zeroing in on FinFET technology specifically, though they may also ban sales of older chipmaking equipment as well.

Without a continued stream of machines, spare parts and technical know-how from those five semiconductor giants, China’s semiconductor industry is doomed. China’s domestic semiconductor equipment industry is essentially garbage, and they’re so far behind in so many areas that they can’t even steal their way to parity. The knowledge gulf is just too vast.

Min-Hua Chiang at the Heritage Foundation notes just how badly China’s domestic semiconductor industry is screwed.

According to World Trade Organization statistics, China’s trade deficit in integrated circuits and electronic components (including Hong Kong’s trade deficit) has almost doubled from the equivalent of $135 billion in 2010 to $240 billion in 2020.

The growing trade deficit in integrated circuits reveals one crucial fact: Achieving technological self-reliance is still a faraway Chinese dream. To keep its exports growing, China has no other way but to keep importing advanced chips to assemble into consumer goods with high-tech intensity (e.g., smartphones, tablets, and the like).

Although China (including Hong Kong) is also the largest exporter of semiconductor chips in the world, less than 7% of chips produced in China were made by Chinese semiconductor companies in 2021.

More than 90% of chips produced in China are made by foreign firms. In other words, China’s exports of semiconductor chips are overwhelmingly dominated by foreign companies.

Its inferior level of technology is the main reason for China’s chip reliance on foreign firms. While Chinese firms are stuck with advancing toward 7nm chips, the Taiwan Semiconductor Manufacturing Co. and Samsung are progressing towards mass production of 3nm chips this year. Intel plans to take over TSMC’s leading role in semiconductor technology by 2025.

The competition among a few tech giants in the U.S., Taiwan, and South Korea is clear, and the Chinese firms are not likely to jump into the global technology competition in the semiconductor industry anytime soon.

The U.S. restrictions on exporting chipmaking equipment to China’s largest semiconductor firm, Semiconductor Manufacturing International Corp., have not only deterred China’s technological advancement, but also exposed the fundamental mismanagement problems inside China’s semiconductor industry.

Xi might not have noticed his industry’s poor performance had China been able to continue to produce chips with foreign equipment.

Some parts about the Tsinghua scandal snipped.

Several Taiwanese executives leaving China’s semiconductor industry last year is another major setback in the development of China’s semiconductor industry.

China not only spent tremendously on building chip plants and purchasing expansive equipment, but also on recruiting talent from overseas. Over the past few years, China recruited more than 3,000 skilled workers from Taiwan to work in China’s semiconductor industry.

China amassed enormous capital, talent, and foreign equipment, but the problem is with governance. Xi’s absolute authority encouraged a rush into China’s semiconductor industry. Moreover, the extraordinary integration of the public and private sectors in China has twisted industrial development toward short-term profit-making, instead of long-term accumulation of manufacturing strength and technological improvement.

Xi’s “wolf warrior” diplomacy has further overshadowed the outlook of its semiconductor industry. China’s success relies on close partnerships with various suppliers and customers in different countries across the globe. Alienating them on the geopolitical front only undermines those relationships.

The U.S. ban on exporting chipmaking machines to China was the straw that broke the Chinese semiconductor industry’s back.

On top of that, the CHIPS and Science Act just signed into law bans semiconductor companies receiving U.S. government subsidies from investing in China for the next 10 years. There are major loopholes in that prohibition, but if Congress can manage to keep the administration’s feet to the fire—including by tightening the legal restrictions—it could have a major impact on China’s tech development.

In addition, the U.S. has extended the export restriction to 14 nm chipmaking machines to the Semiconductor Manufacturing International Corp. and other foreign chipmakers in China. A specific electronics design automation software for making advanced chips is also banned from exportation to China.

Without foreign investment and inputs, China is only likely to deepen its reliance on importing advanced chips from overseas.

Peter Zeihan notes (correctly) that China’s semiconductor industry has been singularly unable to fab advanced chips on their own.

Not to mention that fraud still abounds. Chinese CPU semiconductor startup Quillion Technology closed up shop three months after raising $89 million.

$89 million is probably enough to get you to tape-out for a fabless semiconductor house designing a smaller chip (or maybe even a low-power ARM-based CPUs for embedded markets), but it’s a woefully small sum for a real cutting-edge CPU company, and laughable if they intended to be an integrated design manufacturer fabbing their own chips, where building even a trailing edge fab starts in the billions.

More on that topic:

Takeaways:

  • “Money seems to have a strong corruptive power over CCP officials that they can’t resist. Like China’s real estate industry, China’s semiconductor industry is also plagued with corruption, over-construction, and highly leveraged capital maneuvers.”
  • She goes over the history of the Chinese “Big Fund” for semiconductors I covered here, and later talks about the indictments.
  • “The state-run Semiconductor Investment Fund was used more as an instrument to speculate in stocks than an institution for conducting basic R&D. The government-backed fund, aka the “Big Fund,” has investments in 2,793 entities within three layers of ownership.” Very few of them have the word “semiconductor” in their names. (Like I said before, shell games all the way down.)

  • From 1984 to 1990, the Ministry of Electronics Industry delegated the management of the vast majority of state-owned electronics enterprises to local provincial and municipal governments. While these state-owned enterprises (SOEs) obtained more autonomy, something strange happened. These companies imported outdated integrated circuit production lines that had no commercial value. The wasteful projects cost money, but people used the opportunities to take foreign trips, receive kickbacks, and send their children abroad. And this happened on a large scale.

    Pretty much classic ChiCom behavior.

  • China’s high-tech industry, like its financial industry, is dominated by powerful CCP families, and the Jiang Zemin family is one of them. In 1999, Jiang Zemin gave his oldest son, Jiang Mianheng, the reins of China’s “autonomous chip development.” As vice president of the Chinese Academy of Sciences (CAS) and president of the Shanghai branch for many years, the junior Jiang has long held the turf of China’s science and technology sector. He is also personally involved in the semiconductor business. His Shanghai Lianhe investment has holdings of Shanghai Zhaoxin Semiconductor Company.

  • Classic story:

    Chen Jin, a former junior test engineer at Motorola, joined Shanghai Jiaotong University in 2001 after returning to China.
    He was given the responsibility to develop the “Hanxin” chip, an important part of the state-run high-tech development program known as the “863 Program.” In just three years, Chen obtained 100 million in R&D funding and applied for 12 national patents. On Feb. 26, 2003, Chen’s team officially released the “Hanxin 1” chip. The Shanghai Municipal Government, the Ministry of Information Industry, and the Chinese Academy of Sciences all backed his work. The expert panel declared the “Hanxin 1” and its related design and application development platform as being the first of its kind in China and achieving an important milestone in the history of China’s chip development. Subsequently, Hanxin 2, 3, 4 and 5 chips were launched, all of which were claimed to have reached an advanced level globally. The Hanxin series of chips even entered the General Equipment Procurement Department of the Chinese military. However, 3 years later, on Jan. 17, 2006, “Hanxin 1” was revealed to be completely fake. Chen downloaded a Motorola chip source code through a former Motorola colleague. Then he secretly bought a batch of Motorola dsp56800 series chips, paid a peasant to scrape the original Motorola logo with sandpaper, and asked a local Shanghai print shop to print the “Hanxin” logo on it.

    • China correctly identified semiconductors and semiconductor equipment as key technologies for truly becoming the world’s preeminent technological manufacturing giant. Unfortunately for them (and fortunately for us), the CCP’s endemic culture of corruption and their top-down command economy are antithetical to the onrush of capitalist technological innovation that powers Moore’s Law.

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    Posted in Communism, Foreign Policy, video | 9 Comments »

    Then: Commercial Investors Are Sucking Up All American Housing! Now: They’re Losing Their Shirts!

    Thursday, September 8th, 2022

    If you can remember all the way back to pre-Flu Manchu 2020, housing prices were soaring and there were a raft of articles decrying how commercial investors were snapping up housing as fast as they possibly could, pricing ordinary Americans out of the market.

    Now, some two years later, it’s evident that a lot of those commercial investors kept buying right up through the peak of the market, and are now proceeding to lose their shirts on those deals thanks to the Biden Recession.

    Take, for example, OpenDoor, the company that sends out those endless “We want to buy your home” letters. They promised investors they were going to use the Internet to revolutionize home-buying by flipping homes at scale and cut out the middle man. How well did they succeed?

    Now that they’ve had a while to run their system, the answer is: Not so well.

    Takeaways:

  • One thing I was unaware of: Commercial investors in residential real estate fund their purchases through variable interest rate debt.
  • OpenDoor’s outstanding debt balance “has ballooned from $271 million to $6.1 billion.”
  • Every point rise in interest rates costs OpenDoor $40 million more in interest rate payments.
  • “OpenDoor is truly a modern day house of cards. The company’s revenue grew from $1.8 billion in 2018 to over $8 billion in 2021. To grow they scaled, going from 18 markets to 44 markets in the U.S. In those four years, the company went from flipping 7,000 homes a year back in 2018 to now flipping 21, 000 homes most recently in 2021.”
  • “Despite OpenDoor’s top-line growth, the company has incurred loss after loss after loss, each bigger than the last, even in a strong rebound year in 2021. Where the company sold a record number of homes, OpenDoor incurred a record loss of over $600 million.”
  • Some math snipped. “OpenDoor would need to sell roughly sixty thousand homes a year just to break even with how much it costs the company to exist in its current burn rate. Every time the interest rate goes up a single point, OpenDoor needs to sell an additional 2,000 homes in order to offset that additional $40 million.”

    • The end of the video touches on how Zillow lost $881 million by trusting an algorithm that had them paying above-marker prices. We covered that briefly here some nine months ago. Here’s a video with more details:

    But it’s not just OpenDoor and Zillow. Here’s a video that explains why all the large-scale commercial buyers of residential real estate (including those buying to rent it out rather than flip) are screwed by rising interest rates:

    Takeaways:

  • The Fed “is now committing to not only continue increasing interest rates, they’re committing to keeping interest rates elevated for the foreseeable future.”
  • “These real estate investors are going to be losing money in the housing market on their investments, and that they are going to have to fire sale their portfolio as a result.”
  • “Over the last year, the investor profit or the cap rate in America is about 4.5%, which was pretty good in 2021, when interest rates were zero, but now that interest rates are projected to go to 3.8%, we can see that investors who buy real estate in America are basically getting very little premium over buying a short-term government bond.”
  • “As this investor demand continues to go down, home prices are also going to continue to go down in America, because in many markets investors were quarter of the demand, a third of the demand for homes over the last of couple years, and in some neighborhoods investors were 50—60% of the demand.”
  • “A lot of people think [commercial buyers pay] cash, but folks, it’s never cash, it’s always a bank in the background giving these hedge funds and private equity funds money to buy single-family homes.”
  • “They’ll give these hedge funds maybe 70—75% percent of the money to go do it, like a normal loan. The thing is, the loans that these Wall Street investors use to buy homes are often adjustable rate loans, where every time the fed hikes interest rates, the Wall Street investor has to pay more in debt service and interest on their existing portfolio.”
  • “We’re gonna get to a point soon over the next six months where these Wall Street investors are having to pay more to their bank and their warehouse lender than they’re going to receive in income and rent from their tenant. Like, literally, these Wall Street investors not only are going to see the value of their property going to go down, they’re going to begin losing money in terms of cash flow.”
  • So not only will investors have to sell, but frequently they won’t have any choice.

    Because their lender, their bank, is going to do something called a margin call. At a certain point, they’re gonna say “Hey Wall Street buyer who I’m giving money to, the value of the homes has gone down and now you can barely afford to pay interest. You’re gonna have to now just pay us off, or pay us down,” and when the bank does that margin call, these investors are then going to be forced to sell off their portfolio, because they’re going to need the cash, causing a massive, widespread dump of inventory onto the U.S. housing market.

  • He doesn’t mention Austin by name in this video, but he does in another pegging it as the #5 market most likely to see price drops. “This is a market in absolute freefall.” “In the span of just five months, the number of homes for sale in Austin has increased from 1460 and February to nearly 8 000 in July.” He thinks home prices could down by 40%. Naturally, as an Austin-area home-owner, I think that’s way too much, but I do expect significant retreats from the highs reached early this year.
  • He also thinks inflation is going to get worse (which is probably a good bet).

    • (In another video covering some of the same ground, he mentions BlackRock, one of the biggest boogeymen in public perceptions of buying residential real estate. Guess what? “BlackRock is not a big player in terms of owning, managing and buying real estate in the U.S.”)

    Like the fear of Japan buying everything in the late 1980s, fear that institutional investors will make owning a home impossible for ordinary Americans turned out to suffer from the same recency bias, assuming that what is going on right this minute will continue for the foreseeable future.

    Like assuming that the giant ants are unstoppable, or that Hispanics will always vote for Democrats, assuming that housing prices will always go up and that credit will always be cheap are categorical mistakes that the market will eventually punish you for making, and the companies that made it are now bleeding red ink.

    People who sold during the bubble made out like bandits, and people who bought during it got screwed, but what can’t go up forever won’t. Bubbles pop. Absent government distortions of the market*, supply and demand have a way of adjusting.

    Anyway, if you need to buy a house, nine months from now is probably going to be a great buyer’s market…

    *And yes, lots of cities and states try their damnedest to prevent new housing from being built. I’m looking at you, California.

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    Posted in Austin, Economics, Texas, video | 11 Comments »

    New PayPal Walmart Phishing Scam Making The Rounds

    Monday, August 22nd, 2022

    There’s a new phishing scam making the rounds. I’ve received examples of this one twice myself over the last week, and since it’s a lot more sophisticated and polished than the average email phishing scam, I think it’s worth taking a look at.

    Scammers are using invoices sent through PayPal.com to trick recipients into calling a number to dispute a pending charge. The missives — which come from Paypal.com and include a link at Paypal.com that displays an invoice for the supposed transaction — state that the user’s account is about to be charged hundreds of dollars. Recipients who call the supplied toll-free number to contest the transaction are soon asked to download software that lets the scammers assume remote control over their computer.

    KrebsOnSecurity recently heard from a reader who received an email from paypal.com that he immediately suspected was phony. The message’s subject read, “Billing Department of PayPal updated your invoice.”

    While the phishing message attached to the invoice is somewhat awkwardly worded, there are many convincing aspects of this hybrid scam. For starters, all of the links in the email lead to paypal.com. Hovering over the “View and Pay Invoice” button shows the button indeed wants to load a link at paypal.com, and clicking that link indeed brings up an active invoice at paypal.com.

    Also, the email headers in the phishing message (PDF) show that it passed all email validation checks as being sent by PayPal, and that it was sent through an Internet address assigned to PayPal.

    Both the email and the invoice state that “there is evidence that your PayPal account has been accessed unlawfully.” The message continues:

    “$600.00 has been debited to your account for the Walmart Gift Card purchase. This transaction will appear in the automatically deducted amount on PayPal activity after 24 hours. If you suspect you did not make this transaction, immediately contact us at the toll-free number….”

    As always, look at every message from any financial institution as a potential phishing attack, so never click on links sent in email. Use your regular browser login to see if it’s a real issue, and if it’s a phishing scam, be sure to report the email in question.

    Let’s be careful out there…

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    Posted in Crime, Waste and Fraud | No Comments »

    Blog Outage Update

    Wednesday, August 17th, 2022

    Yesterday afternoon, BattleSwarm went down with 500 errors. Contacting Bluehost, they said it was a problem with an old stats plugin. When I went into my dashboard to fix this, surprise! Nothing worked! And the blog was still down hard.

    After two round-and-round chat sessions with Indian technical support personnel using vague screen replies, the problem still wasn’t resolved, and they told me it was a server-wide problem affecting many people. And indeed, I’m evidently not alone in having a problem with BlueHost.

    Also, this notice from https://www.isitdownrightnow.com doesn’t exactly suggest a company brimming with confidence.

    Right now, the blog appears to be up, though with the characteristic slowness and dropped connections during editing that seem common this year. I have not received the email that the second Indian technical support guy promised would be sent when things were resolved.

    Hopefully it will stay up long enough to update some plugins…

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    Posted in Uncategorized | 2 Comments »

    Semiconductor Update for July 18, 2022

    Monday, July 18th, 2022

    Enough links have filtered into the semiconductor bucket to be worth doing a roundup. This one touches on China and the corruption of our political elites.

  • The congressional Democrats’ attempt to throw money at the problem is going nowhere fast.

    The Biden administration is laser-focused on sending Ukraine billions of dollars in weapons, including the latest round of anti-ship systems, artillery rockets, and rounds of 105 mm ammo for howitzer cannons that it has entirely lost focus on reshoring efforts to boost semiconductor production Stateside.

    Multiple manufacturers of semiconductor wafers have announced plans for new multi-billion dollar factories across the U.S. but are contingent on Congress allocating funds to aid in building facilities under the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act.

    Congress passed the CHIPS Act in January 2021 as part of last year’s National Defense Authorization Act, which proposed $52 billion in funding for increasing the domestic capacity of chip production, though the House and Senate have come to a standstill over disagreements on certain parts of the bill that have sparked so much uncertainty among companies set to build new factories.

    In a letter on June 15, dozens of technology executives from IBM, Intel, Microsoft, Analog Devices, Micron, Amazon, and Alphabet called on Congress to move quickly on the CHIPS Act. They wrote, “the rest of the world is not waiting for the U.S. to act,” and funding for new chip factories must be achieved immediately.

    Taiwan’s GlobalWafers announced a new $5 billion factory in the U.S. on Monday, but contingent on subsidies from the federal government.

    “This investment that they’re making is contingent upon Congress passing the CHIPS Act. The [GlobalWafers] CEO told me that herself, and they reiterated that today,” U.S. Commerce Secretary Gina Raimondo told CNBC, the same day GlobalWafers announced its development plan.

    Notes:

    • IBM doesn’t own any fabs any more, having sold them all to GlobalFoundries.
    • Intel runs a huge number of very profitable fabs (troubles with their sub-10nm process yields notwithstanding) and doesn’t need federal subsidies.
    • Microsoft doesn’t own any fabs and is deeply unlikely to build any; their flagship Xbox Series X uses a custom AMD Zen 2 fabbed by TSMC as its CPU.
    • Analog Devices is an Integrated Device Manufacturer that owns several fabs with pretty old technology; they don’t have any 300mm fabs. They closed a small fab in Milpitas they got from their acquisition of Linear Technology last year. Designing analog chips is its own black art, and not everything that applies to shrinking digital circuits applies to the analog realm.
    • Amazon has no fabs and probably won’t be building any, but they do have a chip design division to support Amazon Web Services, and recently designed a cloud computing chip. They work closely with AMD (fabbed at TSMC), Intel (own their own fabs) and Nvidia (another fabless design house that also gets their chips fabbed at TSMC).
    • Alphabet AKA Google has no fabs and probably won’t be building any, though they do have a lot of AI chip design work going on.
    • GlobalWafers isn’t a semiconductor manufacturer, it’s a silicon wafer manufacturer. Making such wafers (the substrates upon which semiconductor fabrication depends) has its own challenges, but they are several orders less difficult than cutting edge chip fabrication. Maybe I’m quite far out of the loop, but I’m deeply suspicious that GlobalWafers planned wafer plant in Sherman, Texas will cost $5 billion. That’s a relatively piddling sum for a new semiconductor fab, but extremely expensive for a wafer factory. This makes me suspect a subsidy grab is afoot.

    So of the companies mentioned, Intel could suck up government funding to build a fab they were going to build anyway, I’m sure Analog Devices would build a fab with government money, but chances of them running an under 10nm process in said theoretical fab is extremely slim, none of the other mentioned copies are going to build a fab, and none of that government money is going to alleviate the main problem that the overwhelming majority of cutting edge chip designs have to flow through TSMC fabs in Taiwan. What will solve that problem is TSMC opening a state-of-the art fab in Arizona in 2024. No amount of U.S. taxpayer money will make that already-under-construction fab start producing chips any quicker.

    As I’ve mentioned previously, semiconductor subsidies are the wrong solution to the wrong problem.

    $250 billion in taxpayer subsidies wouldn’t get you a single additional wafer start this year, and probably would accomplish little more than channeling money to politically connected firms and sticky pockets in a state (New York) that no one wants to build fabs in any more because of high costs, high taxes and union rule requirements.

  • So who expects to earn immediate gains from the taxpayers subsidizing semiconductors? Would you believe Nancy Pelosi?

    I bet you would.

    This past week it hit the terminal that House Speaker Pelosi was doing a little portfolio re-jiggering, including exercising $8 million of call options in Nvidia and selling Apple and Visa calls. The data was per CongressTrading.com and was reported on by Bloomberg.

    The Nvidia LEAPS were bought June 3, 2021 with $100 strikes, set to expire June 17, 2022 and the position appeared to be disclosed on Thursday morning for the first time. $8 million trades seem a little odd for members of Congress to begin with, but who are we to judge?

    But then, what did Speaker Pelosi do just hours after disclosing the trade, on Friday?

    She threw her weight behind a stalled $50 billion CHIPS PLUS bill that “would provide $52 billion in funding for semiconductor manufacturing grants and investment tax credits for the chip industry.”

  • Speaking of TSMC, they’re tired of their customers using their old tech.

    We tend to discuss leading-edge nodes and the most advanced chips made using them, but there are thousands of chip designs developed years ago that are made using what are now mature process technologies that are still widely employed by the industry. On the execution side of matters, those chips still do their jobs as perfectly as the day the first chip was fabbed which is why product manufacturers keep building more and more using them. But on the manufacturing side of matters there’s a hard bottleneck to further growth: all of the capacity for old nodes that will ever be built has been built – and they won’t be building any more.

    Not strictly true. Remember, Bosch just finished building a 65nm fab.

    As a result, TSMC has recently begun strongly encouraging its customers on its oldest (and least dense) nodes to migrate some of their mature designs to its 28 nm-class process technologies.

    Nowadays TSMC earns around 25% of its revenue by making hundreds of millions of chips using 40 nm and larger nodes. For other foundries, the share of revenue earned on mature process technologies is higher: UMC gets 80% of its revenue on 40 nm higher nodes, whereas 81.4% of SMIC’s revenue come from outdated processes.

    That’s because UMC has fallen woefully far behind TSMC, and no one trusts them because they let Chinese spies walk out the door with other company’s IP. SMIC is on Mainland China, sucks even more, and is trusted even less.

    Mature nodes are cheap, have high yields, and offer sufficient performance for simplistic devices like power management ICs (PMICs). But the cheap wafer prices for these nodes comes from the fact that they were once, long ago, leading-edge nodes themselves, and that their construction costs were paid off by the high prices that a cutting-edge process can fetch. Which is to say that there isn’t the profitability (or even the equipment) to build new capacity for such old nodes.

    This is why TSMC’s plan to expand production capacity for mature and specialized nodes by 50% is focused on 28nm-capable fabs. As the final (viable) generation of TSMC’s classic, pre-FinFET manufacturing processes, 28nm is being positioned as the new sweet spot for producing simple, low-cost chips. And, in an effort to consolidate production of these chips around fewer and more widely available/expandable production lines, TSMC would like to get customers using old nodes on to the 28nm generation.

    “We are not currently [expanding capacity for] the 40 nm node” said Kevin Zhang, senior vice president of business development at TSMC. “You build a fab, fab will not come online [until] two year or three years from now. So, you really need to think about where the future product is going, not where the product is today.”

  • This video asks whether China can produce their own chips:

    Obviously, they already produce some of their own chips, but the video covers most of the issues China has with fabbing more complex chips that I’ve already discussed here and here. They’re still dependent on the same three leading fab companies (TSMC, Intel and Samsung) everyone else is for sub 10nm feature chips, and are overwhelmingly dependent on both foreign talent and foreign semiconductor equipment manufacturers like ASML and Applied Materials.

  • Speaking of TSMC and Intel, India would really like them to build fabs there. The problem is, despite a whole lot of technical talent there, it doesn’t have a terribly large domestic electronics manufacturing base.

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    Posted in Democrats, Economics, Elections, Foreign Policy, Texas, video | 9 Comments »

    Q: Can You Double-Pattern Rather Than Use EUV? A: You Don’t Want To

    Sunday, April 10th, 2022

    This is going to be pretty esoteric for many of my readers, but in previous semiconductor posts covering ASML, some commenters have suggested that fabs can do multi-patterning for smaller nodes rather than having to use ASML’s extreme ultraviolet stepper. The following video explains why, below a certain threshold, no, you really can’t.

    I’m not going to summarize every point, but the largest takeaway is that multi-patterning is computationally prohibitive. Double-patterning splits a single mask into two masks, each of which only create half of the mask pattern on the die. Double-patterning was fine for a while, but triple patterning and self-aligned double-patterning start making finding optimal solutions to the mask splitting problem exponentially more difficult.

    Take a square. A square has four nodes in it. With double patterning, each of the two masks handle opposing sides of the square. And with this four-node shape, there are two double patterning options available for coloring. The EDA software thus has to check through them for design rule violations and whatnot. With triple patterning, the number of variations explodes exponentially. For that same square four node structure, triple patterning has 18 variations rather than just two with double patterning. A five node structure, 30. And so on. A semiconductor design can have hundreds of different nodes and design variations. The software needs to check through at least a good portion of these. This problem is not solvable in polynomial time. In other words, for you computer science nerds out there, it is an NP complete problem.

    And then there’s the cost. “Depending on whose cost model you consult, [10nm]’s triple patterning makes its lithography module 3.85x higher than [28nm].” And the non-EUV 7nm node required triple-patterning and something called “self-aligned quadruple patterning.” And on Intel: “Brian Krzanich has said that in certain cases the company needs to use quad (4x), penta (5x), or hexa (6x) patterning for select features, as they need to expose the wafer up to six times to “draw” one feature. I am not super surprised that it wouldn’t yield. No wonder GlobalFoundries ditched their 7nm node.”

    And this summary glosses over big differences between different fab technologies on different companies. TSMC’s 7nm isn’t the same as Intel’s 7nm.

    Anyway, all this goes a long way to explain: Multi-patterning is much more painful than simply ponying up the cost for an ASML EUV stepper. And if you want to do 6nm, you have to use EUV.

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    Posted in Uncategorized, video | No Comments »

    Why Russian Technology Is Screwed

    Tuesday, March 29th, 2022

    Welcome to another in the continuing “Why Russia’s X Is Screwed” series! It seems that Russia’s technological infrastructure is even more screwed than their airline industry.

    Some takeaways:

  • If the sanctions are maintained, they will “almost certainly cause the collapse of Russia’s economy on short notice, and will set the country’s technological progress back by decades.”
  • Russian state entities and miltech was put in “a complete black box.”
  • “Even non-military end users were still barred from key technologies, such as semiconductors, telecommunication, encryption security, lasers, sensors, navigation, avionics and maritime technologies. Other countries from the EU to Japan and South Korea all imposed similar sanctions of their own.”
  • Even many private companies that lobbied for special carve-outs from sanctions changed their mind and suspended all business with Russia.
  • Just about every car and truck manufacturer. “95% of car parts in Russia are imported.”
  • Apple, Samsung, Dell, HP, Oracle, SAP, and Microsoft have all halted sales.
  • “Overnight, many industries in Russia are just gone.”
  • Every high tech company in Russia relies heavily on foreign inputs and expertise.
  • He talks about the embargo on semiconductors (more on this in the video below), but says that it applies even to chips made with embargoed tech. So if SMIC used an Applied Materials PVD machine, those chips couldn’t legally be shipped to Russia. I am skeptical this is actually the case (and it would be very hard to enforce on Chinese companies).
  • “The Russian economy did not prepare itself for sanctions anywhere near this severe.”
  • Two-thirds of Russia’s foreign reserves of $643 billion were parked abroad, which was all frozen when sanctions came down.
  • “Every part of the Russian economy has just received major damage, and there’s no way they can pivot everything all at once.”
  • “They’re simply not survivable in the long-term.”
  • Russia has increased interest rates to 20% to keep the ruble from collapsing further.
  • Even China has slowed-down or halted loans to Russian entities.
  • Russia is going to run out of cash “in a few weeks to a few months.”
  • Russia is heavily reliant on foreign tech, but for most tech companies, Russia is a minor market.
  • Expect a brain drain as wealthy and skilled Russians lose their jobs, then move abroad.
  • Many national industries simply cannot exist without foreign inputs. Substitutes would take years, if not decades.
  • Conclusion:

    If these sanctions continue, there will be no economy left to support the Russian military. Russian technological progress will be thrown back by years, if not decades, across the board. And in just a couple of weeks, or maybe months, the vultures will start circling, and they will start picking off every interesting
    Russian asset, every interesting Russian employee, oil fields, anything that they can get their hands on. And they’ll start transporting that out of the country as well. I cannot believe that Putin started a war expecting any sanctions anywhere near this scale.

    • Now on to semiconductors:

  • TSMC halted all shipments to Russia, as has AMD and Intel.
  • The Soviet Union had a massive technology gap between it and the United States, which only got worse as time went on.
  • All the computing power in every computer in the Soviet Union in 1991 combined would fall two generations short of a single Cray.
  • “The most advanced semiconductor production facilities were in East Germany, Belarus, Ukraine, and so on.”
  • JSC Mikron is Russia’s largest semiconductor manufacturer. “Today it fabs RFID tickets, SIM cards, and other smart card products.” They did about $260 million in business in 2020 (including government subsidies). They bought IP from STMicroelectronics.
  • In 2014, Mikron announced “the successful achievement of the 65 nanometer node at a volume of 500 200mm wafers a month.” [record scratch] 500 wafer starts a month??? That’s nothing. TSMC’s top of the line fabs generally do 120,000 wafer starts a month. It’s maybe OK if you’re running weird, demanding, high profit, low-volume processes (say, Gallium-Arsenide chips for use in satellites), but not for Mikron’s main business line (RFIDs).
  • But all that is beside the point, since they didn’t have a stepper capable of doing 65 nanometer. “Fujitsu, Toshiba, and TSMC started shipping their commercial 65 nanometer nodes in 2005. So this means that Russia’s gap with the leading edge has grown from 9 years to 15+.”
  • Russia’s Angstrem offers a wafer foundry doing “130 nanometer and 90 nanometer process nodes on 200mm wafers. Their capacity is about 180,000 wafers a year.” They declared bankruptcy around 2019. They were also hit by U.S. sanctions after the Crimean invasion. Successor company NM-Tech has a pie-in-the-sky plan to do 10nm in 10 years. Don’t hold your breath.
  • (I notice he makes no mention of “Crocus Nano Electronics,” which supposedly runs Russia’s only 300mm wafer fab (“Established in 2011, Crocus Nano Electronics is the world’s first and only 300mm fabrication facility, located in Russia”), but when you get down into their press releases, it says “The development and production of Crocus Nano Electronics ReRAM memory chips were manufactured on 55 ULP CMOS by Shanghai Huali Microelectronics Corporation (HLMC).” So either they’re a fabless design house, or they only do the metal interconnects fabrication and nothing else in the process, which is so weird a model I can’t really wrap my head around it.)
  • I’m omitting the coverage of various fabless design houses, since they’re dead-in-the-water without access to decent foundry technology or foreign markets.
  • They can probably get stuff fabbed at China’s SMIC.

    • If Russia had turned into a regular country after 1991, there’s no reason they couldn’t have launched a competitive domestic tech industry. The Soviet Union had large number of frequently bloody flaws, but they didn’t stint on STIM education, and maintained very competitive space capabilities despite numerous handicaps. But instead, they turned into a corrupt oligarchy-turned-dictatorship, and all that human capital either emigrated or withered on the vine.

    And now, thanks to Vlad’s Big Ukraine Adventure, they’re even more screwed than they were before.

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    Posted in Economics, Foreign Policy, Military, video | 11 Comments »

    LinkSwarm for March 18, 2022

    Friday, March 18th, 2022

    Hunter Biden’s laptop takes another turn in the news cycle, Democrat-connected sex offenders are popping up everywhere, a killer camel, and the return of Florida Man. It’s the Friday LinkSwarm!

    And virtual no Russo-Ukrainian War news, since I did that yesterday.
    

  • Are you ready for an absolutely shocking development? The New York Times finally admits that the Hunter Biden laptop story is real.

    I would say that everyone outside of the Democratic Media Complex knew that two years ago, but of course, more than half the Democratic Media Complex knew that as well and simply lied about it to get Biden elected.


    

  • “Lawyer For Mother Of Hunter Biden’s Daughter Says He Expects President’s Son To Be Indicted.”
  • “US-Mexico Border Town Transformed Into Warzone After Drug Cartel Leader’s Arrest.”

    The Mexican border city of Nuevo Laredo has been transformed into a warzone after the arrest of a top cartel boss. Burning vehicles littered the streets, and heavy gunfighting was reported causing the U.S. consulate to go on lockdown and the U.S. border crossing to be temporarily shut down on Monday.

    The chaos erupted late Sunday when Juan Gerardo Trevino, or “El Huevo,” the leader of one faction of the Northeast Cartel, the successor group to the Zetas Cartel, was arrested. He is also a U.S. citizen, a Mexican government official told Reuters. Trevino is on the U.S. Customs and Border Protection’s (CBP) list of most wanted cartel members.

    Trevino faces a U.S. extradition order for drug trafficking and money laundering.

    In response to the arrest, cartel members hijacked and burned vehicles and attacked law enforcement and military personnel.

    “During the night of Sunday, there were shootings, burning of trucks, and a grenade attack on the U.S. consulate,” Mexican newspaper El Occidental said.

    On Monday, Nuevo Laredo Mayor Carmen Lilia Canturosas warned citizens in the border town to take cover.

  • The woke want to destroy science. “The giant plan to track diversity in research journals. Efforts to chart and reduce bias in scholarly publishing will ask authors, reviewers and editors to disclose their race or ethnicity.” Translation: Science is not sufficiently biased in favor of our political goals.
  • No, Democrats don’t get to pretend they weren’t in favor of defunding the police.

    According to the latest Winston Group poll, voters still believe Democrats want to defund the police by a 48%-34% margin.

    “In terms of what is the position of the Democratic Party, voters tend to believe that Democrats want to defund the police, ” pollsters David Winston and Myra Miller explain. “Among groups outside the Democratic Party, Hispanics believe this is what Democrats want (49%-32%), as do suburban voters (45%-36%). Independents believe this slightly at 41%-33%, but especially conservative independents (61%-20%).”

    Despite the efforts to distance themselves from the movement, some in the Democratic Party still openly support defunding the police, which means that the public will continue to believe Democrats still embrace the radical Black Lives Matter. movement, not police.

  • Federal Reserve raises interest rates .25%, bringing it to .5%. Remember, in order to kill the last bout of inflation, Paul Volker hiked rates up to 20%. There’s a lot more pain ahead…and given the huge amount of quantitative easing centrals banks have done, and the extensive budget deficits most of the governments in the developed world are running, 20% may not be enough.
  • Speaking of the fed: “Biden Fed pick Raskin withdraws nomination in face of opposition from Manchin.” Good. There’s nothing about “fighting climate change” in the Fed charter. (Hat tip: Director Blue.)
  • Researcher Kyle Becker produced in-depth, acclaimed portrait of just how much money Anthony Fauci was making. Result: Forbes fired him. (Hat tip: 357 Magnum.)
  • Riots in Corsica, which wants to be independent of France.
  • Former Clinton pollster confirms that Democrats are out-of-touch.

    The electorate is increasingly pessimistic about the direction in which President Biden and Democrats are steering the country and feel that the party’s priorities do not align with their own.”

    What’s the solution?

    The pollsters advise that if Democrats want to have “a fighting chance in the midterms – as well as a shot at holding on to the presidency in 2024,” that they need to embark on a “broader course correction back to the center,” and show voters that they are focused on solving quality-of-life issues.

    In short, Democrats need to reject their progressive wing and its embrace of big government spending and identity politics.

    Indeed, a majority of voters (54 percent) — including 56 percent of independents — explicitly say that they want Biden and Democrats to move closer to the center and embrace more moderate policies versus embracing more liberal policies (18 percent) or staying where they are politically (13 percent).

    Most voters (61 percent) also agree that Biden and Democrats are “out of touch with hardworking Americans” and “have been so focused on catering to the far-left wing of the party that they’re ignoring Americans’ day to day concerns” such as “rising prices” and “combatting violent crime.” -The Hill

    The top issue for voters is inflation – which sits at its highest level in 40 years – according to 51% of respondents, followed by the economy and job creation (32%). Yet, just 16% of voters believe the economy is Biden’s main focus, and trust Republicans over Democrats to manage it (47% vs. 41%) and control inflation (48% vs. 36%).

    Voters also see Biden and Democrats as weak on crime (56%) – perhaps due to four years of Democrats pushing ‘defund the police’ under Trump, while our sitting Vice President raised bail money for BLM rioters.

  • New York City’s government issues yet another “Fuck You” to residents, extending vaccine and mask mandates.
  • San Antonio school caught introducing segregation.
  • “Disney employees busted in child trafficking sting just days after corporation opposed anti-grooming law.”
  • Speaking of groomers: “Clinton-Connected Haiti Pastor Indicted For Child Sexual Abuse & Assault…The United States is charging pastor Corrigan Clay with child sex abuse after “engaging in illicit sexual conduct” with a Haitian orphan he adopted…Corrigan is the co-founder of the non-profit charity “Apparent Project”, which is a Clinton-connected group selling jewelry, clothing and art made by Haitian orphans.”
  • Speaking of Democrats being soft on sex offenders, Missouri Republican Senator Josh Hawley uncovers why Biden Supreme Court nominee Judge Ketanji Brown Jackson deserves to be rejected:

  • “Hungary Sees 5.5 Per Cent Birthrate Increase After Enacting Pro-Family Policies.”
  • Mississippi bans Critical race Theory in publicly funded classrooms.
  • San Francisco is now boycotting most of the United States.

  • Taxes in California are now so high that Ozzy and Sharon Osbourne are moving back to the UK. (Hat tip: TPPF’s The Cannon.)
  • Things that make you go “Hmmm”: With Chinese Commodity Tycoon Bailed Out, LME Announces Nickel Market To Reopen.

    With the Nickel market shuttered after a Chinese stainless steel tycoon was caught with a historic, potentially fatal $8 billion margin call hanging over its head, today the London Metal Exchange announced that it will reopen its nickel market on Wednesday, more than a week after it was closed last Monday, after the Chinese company at the center of the epic short squeeze was bailed out by a consortium of banks led by JPMorgan which is also the largest counterparty to the short (for a detailed breakdown read “The 18 Minutes of Trading Chaos That Broke the Nickel Market”) .

    Trading in nickel will resume after Xiang Guangda, whose massive short position equivalent to approximately 150,000 tons of nickel, sent shockwaves across the commodity market last week, announced a standstill with his banks to avoid further margin calls as Bloomberg first reported earlier. Xiang’s Tsingshan Group had been in discussions with banks led by JPMorgan about a loan facility to backstop his short position and said Monday that talks on the funding would continue during the standstill period. As a reminder, Xiang is JPMorgan’s largest counterparty, and owes Jamie Dimon several billion, money which the largest US bank would not receive unless it bailed out the Chinese firm.

    If you owe the bank $100,000, you have a problem. If you owe the bank $8 billion, the bank has a problem…

  • Arm Holdings to lay off 15% of it’s workforce, or about 1,000 people.
  • Category: Extremely unexpected horrifying headlines: Petting zoo camel kills two. Not in the zoo, fortunately, as Humpy had busted out of the joint and was on the lam… (Hat tip: Dwight.)
  • Florida Man suspects his meth is fake. So he asks police to test it.

  • Whoa!

  • How an NPR radio station destroyed the electronics in several Mazdas.
  • Heh:

  • “Zelensky Begs Congress To Bring Back Trump.”
  • Jailbreak!

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    Posted in Border Control, Crime, Democrats, Foreign Policy, Media Watch, Social Justice Warriors, Supreme Court, Texas | No Comments »

    Texas AG Paxton Sues Google (Again)

    Tuesday, January 25th, 2022

    Texas Attorney General Ken Paxton is suing Google again, this time over location tracking.

    Texas Attorney General Ken Paxton has sued Google for harvesting the location data of its users, claiming the practice violates the Texas Deceptive Trade Practices Act (TDTPA).

    “This most recent Google lawsuit argues that the company misled Texas consumers by continuing to track their personal location even when the user thought he or she had disabled it from doing so. Google then uses the deceptively gathered data to push advertisements to the consumer, earning the Big Tech company enormous profits,” Paxton’s office stated in a press release issued Monday morning.

    The Texas Deceptive Trade Practices Act is a law that requires businesses in Texas to truthfully represent their products and ownership to consumers. By misleadingly implying to users that they can stop location tracking, Paxton claims Google violated the section of the law that bans businesses from withholding information that might prevent consumers from using their product.

    “Google has systematically misled, deceived, and withheld material facts from users in Texas about how their location is tracked and used and how to stop Google from monetizing their movements,” the lawsuit claims.

    “[While] many Texans may reasonably believe they have disabled the tracking of their location, the reality is that Google has been hard at work behind the scenes logging their movements in a data store Google calls ‘Footprints.’ But while footprints generally fade, Google ensures that the location information it stores about Texans is not so easily erased.”

    The lawsuit claims that the sheer prevalence of Google technology makes the company’s data collection all the more effective, complete, and specific. Paxton argues that location data alone allows the company to create a “unique mosaic” of each user with information like health status and religious affiliation inferred from travel habits.

    This is a good time to remind you that if Google or Facebook has your email address or phone number (and they do), they have all your personal information and can track you no matter how many cookies or location tracking controls you turn off. And it’s not just them: Any of their advertising partners that has your email or phone number can link you to your Google and/or Facebook profile. So any time you enter your email to, say, use Wi-Fi at a venue, it’s a good bet they automatically have access to all the ad profile information Google and Facebook have gathered on you. And I suspect this information is tied to your phone in various ways, cookies or no cookies.

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    Posted in Texas | No Comments »

    The Babylon Bee Interviews Elon Musk

    Saturday, January 22nd, 2022

    When it comes to longer videos I find interesting, I have a system for posting them here:

    1. I see a longer video I think BattleSwarm readers will be interested in.
    2. I go “Hey, I’ll go ahead and post that as soon as I have time to watch the whole video!”
    3. I never have time to watch the full video.
    4. I never post the video.

    I think there are some drawbacks to the system.

    This Babylon Bee (Seth Dillon, Kyle Mann, and Ethan Nicolle) interview with Elon Musk from back in December is one of those longer videos I meant to get to before now. Rather than continue to hold onto this forever, I’ve watched more of it and am posting it here.

    Some topics of discussion:

  • How Saturday Night Live and The Onion used to be funny before they became so hard left they refused to make fun of Democrats.
  • “Bernie Sanders…Elizabeth Warren…Babylon Bee…Hitler.”
  • The threat to western civilization by the “woke mind virus.”
  • “At its heart, wokeness is divisive, exclusionary and hateful. It basically gives mean people a reason, it gives them a shield, to be mean and cruel, armored with false virtue.”
  • Kyle Mann: “The left is almost this religion now,where they’re so serious, and they believe what they believe with such intensity, that for us to make fun of them you know for them, it’s like you’re making fun of God or salvation.”
  • Musk is much higher on “sustainable energy” than I am (which you would expect for a guy that owns solar power companies), but does say shutting down nuclear power plants is a big mistake.
  • The craziness of trying to shut down Dave Chappelle.
  • “Part of why I moved to Texas, it’s just fewer strings tying you down.”

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    Posted in Democrats, Social Justice Warriors, Texas, video | 1 Comment »

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